Shares in General Electric Co. dropped Monday after UBS relied on its bullish stance, quoting the stock's significant performance in light of continued power market failures and a significant drop in interest rates.
Analyst Damian Karas cut his rating to neutral, having been on purchases since October 31, 2018. He lowered his stock market target to $ 11.50, which is about 12% above today's level, from $ 13.  The industrial conglomerate's share
declined 1[ads1].1% in morning trading, and was led for the seventh decline in the last nine sessions. But the shares were still up 41% so far, compared to 21% rally in SPDR Industrial Select Sector listed fund
20% gain in the S & P 500 index
and Dow Jones Industrial Average s
"Much of the risk is now priced and we believe that the stock will take a respite on a relative basis until we get the clarity of individual assets," Karas wrote in a note to clients.
Karas said the "notable decline" in interest rates this year has a negative balance and valuation of around $ 1 per share. In addition, he said that GE is still facing challenges related to its power business, debt utilization, GE Capital business, litigation and high-profile problems such as the foundation of Boeing Co.s
737 Max aircraft. GE supplies the engines to these aircraft.
In GE's conference call with analysts, CEO Larry Culp 737 said Max Earth has represented a "new risk" for the company, according to a transcript from FactSet. Read more about GE earnings.
Return on 10-year government bond
has fallen by nearly 60 basis points (0.60 percentage points) to 2.101% on Monday. And the Federal Reserve is generally expected to lower its target rate on overnight rates by 25 basis points this month, and possibly by 50 basis points. See Bond Report.
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GE is scheduled to report results in the second quarter of July 31 before the market opens.
Karas said "bottomless monetary" concerns have been eased most, and he expects the management to "make the right decisions" to meet their challenges, but it will take time and the valuation is now "balanced" given its edge in relation to its peers and the broader stock market.
"The market has moved on from bear scenarios as insolvency, but we also believe that investors remain largely cautious with [the] multi-year turnaround and high-profile problems," writes Karas.  Read also : GE plans to fix financial arm – but first eye on the power unit, says CEO Culp.
The stock has increased 60% since the slope of a 9½ year low of $ 6.40 on March 5, 2018, but was still down 23% over the past 12 months.