Morgan Stanley Says GE Has 24% Upside

Morgan Stanley analyst Scott Davis reiterates his rating and target price for General Electric after the company's annual investor meeting.
By Philip van Doorn ,

NEW YORK (

TheStreet

) -- Saying that the company's "cash reinvestment opportunities are many," Scott Davis of Morgan Stanley reiterated his overweight or buy rating for

General Electric's

(GE) - Get Report

shares after the company's annual investor meeting.

Davis's price target for the shares is $22, which would be a 24% gain from Tuesday's closing price of $17.69.

During General Electric's investor meeting, CEO Jeff Immelt said the company was planning to redeem $3 billion in

preferred shares

held by

Warren Buffett's

Berkshire Hathaway

(BRK.B) - Get Report

, which have a 10% dividend.

On Monday, General Electric announced an agreement to purchase pipeline manufacturer

Wellstream Holdings

, which will expand the company's energy infrastructure business in Brazil, Africa and Asia.

The Wellstream deal followed General Electric's announcement on Friday that it was

raising its quarterly dividend

to 14 cents a share from 12 cents a share.

In Davis's report, the analyst said that finance arm GE Capital's "losses have basically bottomed" and that "organic growth of 5% in industrial seems very realistic."

Davis's price target for GE values the company's industrial businesses at $18 a share and GE Capital at $4 a share and said the firm's "cash could become a nice tailwind in this story," although he also said that he "just doesn't know the timing" of when the power generation business will pick up.

Davis concluded that "overall, the GE story is improving, not an exciting story at present but rate of change is encouraging."

--

Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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