Recently, General Electric (GE) received an unexpected upgrade from Wall Street, creating a strong bullish sentiment towards the company. Wells Fargo analyst Matthew Akers stepped in, launching coverage of this industrial giant with a Buy rating and an ambitious $144 price target.

While Akers is new to covering GE, Wells Fargo had already been analyzing and assessing GE's stock. Prior to this upgrade, Joseph O'Dea handled the coverage of GE stock and also rated the shares as Buy, with a $115 price target.

It's important to note that O'Dea's expertise lay in diversified industrial companies, while Akers specializes in aerospace companies. The transition in coverage occurred because GE will soon complete its long-term transformation process by spinning off its power-generation assets. This move will leave investors with two key entities: GE Aerospace and GE Vernova, which focuses on the power business.

Akers expressed a positive outlook for GE Aerospace in his launch report, anticipating high-teens earnings growth over the next few years. He also emphasized that GE Aerospace has the most significant exposure to the aero aftermarket within its group, resulting in robust pricing and margins. Additionally, Akers believes that GE Aerospace will face less downside risk if the economy were to slow down.

Moreover, Akers praised GE's aviation business as a premium aero asset. To determine an appropriate value for GE Aerospace, he applied a 16 times estimated 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) multiple. This valuation aligns well with industry peers.

When considering the energy business, Akers took a different approach. He assigned a 10 times EBITDA multiple to the power-generation business while assuming no value for the wind business, which has consistently incurred losses. For Vernova, he approximated a value of about $21 per share.

In conclusion, GE's recent upgrade from Wells Fargo has generated optimism among investors. The positive outlook is largely driven by the growth potential of GE Aerospace and the company's commitment to transforming its operations. This upgrade represents a vote of confidence towards GE and its future prospects.

GE Stock Rises in Premarket Trading

GE shares experienced a 1.3% increase in premarket trading, reaching a value of just under $123 per share. Comparatively, S&P 500 and Dow Jones Industrial Average futures saw increases of 0.2% and 0.3% respectively.

GE Vernova Spinoff Scheduled for First Half of 2024

The final spinoff for GE Vernova is set to take place in the first half of 2024. Previously, GE had spun off GE Healthcare Technologies in January 2023.

Analyst Coverage Shifts from Industrial to Aerospace

The transition that recently occurred at Wells is expected to repeat itself over the next few months. More industrial analysts will shift their coverage from GE to the aerospace sector. This process has already commenced, as Wells has transferred its coverage. RBC's industrial analyst Deane Dray now jointly covers GE alongside RBC's aerospace analyst Ken Herbert.

GE Vernova Awaits Analyst Coverage

Analyst coverage for GE Vernova is anticipated to be delayed, much like what occurred with GE Healthcare. Vernova is likely to be treated more like an energy company in the financial industry.

RBC Rates GE Shares as "Buy"

RBC rates GE shares as "Buy" and has set a $131 price target for the stock. Currently, 67% of analysts covering GE stock have also rated it as a "Buy." On average, approximately 55% of stocks in the S&P 500 receive a "Buy" rating according to FactSet. The average analyst price target for GE shares is around $138.

Positive Momentum for GE Shares

Leading into Friday's trading session, GE shares had experienced a significant 97% increase. Investors are enthusiastic about the growing demand for air travel as well as the various changes taking place within GE.