Baker Hughes (NYSE:BKR) belongs to Bank of America’s “U.S. 1” list of best ideas, but the firm continues to rate General Electric (NYSE:GE) as a Hold, even though it owns more than $8B worth of BKR shares, Barron’s reports.
There is little to cheer these days in the oilfield services sector, but “we see a structural bull case building for Baker Hughes,” BAML’s Chase Mulvehill writes, “especially as the energy sector enters a transitional period that focuses on cleaner energy and lower emissions, and digital transformation across all energy value chains.”
Mulvehill says BKR is strong in technology used in natural gas production, where activity is better than in oil, and the company also is well positioned to sell artificial intelligence to energy companies.
GE owns ~380M shares of BKR, which are down ~7% over the past three months, potentially creating a paper loss for GE when the company reports its next quarterly results, but GE’s BKR stake could be worth an additional $2.5B if the stock hits Mulvehill’s $29 price target.
But that’s only ~2.5% of GE’s total market cap, not enough to move the needle for BAML, which rates GE a Hold with an $11 price target.