J.P. Morgan lowered its price target on General Electric stock to $10 per share from $11 per share on Thursday, calling a recent gas turbine failure in Texas "a negative development for a company that has little wiggle room" in its struggling power business.
"Bottom line, while we give GE some benefit of the doubt in its comments [minimizing the issue], we think the mere occurrence is significant in the context of the state of the story," J.P. Morgan analyst Stephen Tusa said in a note.
Shares of GE closed trading Thursday at $12.46, down 3.1 percent. GE's stock has fallen nearly 50 percent during the last 12 months. It reached a nine-year low of $11.94 last month.
J.P. Morgan now assumes "weaker results at power and some franchise value impact" for GE, Tusa said.
"We have said time and again how orders at GE do not ultimately equal cash flow, but here the story could be how orders may equal losses and liabilities with a mosaic that confirms our concerns around the on-the-ground impact of everything that has transpired in the past decade," Tusa added.
GE power CEO Russell Stokes said in a LinkedIn post Wednesday his unit identified an "oxidation issue" that affects the lifespan of its new, larger H-class gas turbines.
"Obviously, this was a frustrating development, for us, as well as for our customers," Stokes said in the blog first posted on Wednesday, adding that the company had implemented a fix that had the turbines working within targeted parameters.
CFRA also lowered its price target on GE stock Thursday to $14 per share from $15 per share but did not see the gas turbine problem as overly concerning.
"Overall, we see this as minor bad news for a company struggling to gain traction in its turnaround efforts," CFRA analyst Jim Corridore said in a note.
– Reuters contributed to this report.
Correction: An earlier version misstated the day GE stock closed at $12.86 per share. It was Wednesday.