Shares of General Electric (GE) - Get General Electric Company Report were rising slightly Tuesday afternoon after analysts at Morgan Stanley resumed coverage of the company with an overweight rating and $125 price target.
Analysts at the firm see the narrative changing for the company after a four-year transition.
"The GE narrative has evolved over the last 4 years from de-risking pension, insurance, and market swings in Power. Now it's deleveraging and the Aviation upcycle. We believe the next phase could be the underappreciated strategic value of the pieces, particularly Aviation," analyst Joshua Pokrzywinski said.
Morgan Stanley notes that GE has reduced the risk of its power division, leverage/pension and insurance over the past three years.
Despite those developments, GE shares have been range-bound for the most part of the past two years.
GE shares were up 0.6% to $101.63 at last check Tuesday afternoon. Shares are up just 10% over the past two years.
"We fully expect shares to be more volatile than most industrials around Covid trends given aero exposure but believe the risk/reward over the next year is attractive with a ~2.7:1 bull/bear spread," Pokrzywinski.
Recently GE announced that it will be splitting into three companies. This could serve as another catalyst for the company, according to Morgan Stanley.
"The breakup and related sum of the parts discussion has rarely unlocked significant value on its own, but peer valuation looks misleading and there is new strategic optionality," Pokrzywinski said. "We're particularly intrigued by the future for Aviation."