GE stock is not in the clear yet despite this week's earnings beat, trader says

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One options trader is betting that the industrial giant's stock could fall another 13% in the near term, market watcher Mike Khouw says.

"Despite ... what was widely viewed to be a better-than-expected result, the most active options were actually the June 9. Over 36,000 of those traded in total, " he said. "That included a purchase of 33,600 of those for 19 cents, so somebody is making a bearish bet that this relief rally that we've seen in GE might be over within the next seven weeks or so, and that the stock could see a decline of about 13% from the levels where it closed today.

That would take the stock back below the $10 threshold to as low as $9 a share. But not everyone agrees that GE's future looks so grim. "This is a balance sheet cleanup story," Seymour Asset Management founder and Chief Investment Officer Tim Seymour said on the segment. "To me, you're not playing it for [earnings per share], you're playing its sum of the parts. But it's a cleanup. Again, today's free cash flow outflow [was] 1.3 billion versus 4.3 expected. That, to me, is what this is all about, folks, and I stay long.

GE has climbed nearly 36% year to date after a crippling end to 2018. CEO Larry Culp, who took over in October, called 2019 a "reset year," forecasting annual performance in line with expectations.

 

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