Is GE Aerospace Stock Going to $190? 1 Wall Street Analyst Thinks So.
GE Aerospace (NYSE: GE) recently received another "buy" rating when Goldman Sachs analyst Noah Poponak slapped a $190 price target on the stock. That implies a 21% upside over the next 12 months. His case for the stock emphasizes the long-term earnings and cash flow potential from its commercial aircraft engines, notably the LEAP engine. I tend to agree with the assessment.
Commercial airplane engines tend to be sold at a loss only to generate decades of lucrative aftermarket earnings and cash flow as they come in for "shop visits" over time. For example, GE Aerospace estimates that 75% of an engine's lifecycle revenue comes from the three shop visits, typically in the decades after the sale. Each engine is expected to have at least 20 years of service revenue, and engines can run for more than 40 years.
There are two key points to note. First, aggressively ramping engine sales, as GE is doing now, will suppress profit margins initially but lead to increased profit in the future.
Source Fool.com
