Evaluating ARQT and GE: Strategic Buy Opportunities Amid Volatility and Growth Catalysts

In an era marked by macroeconomic uncertainty and sector-specific divergences, investors must navigate a landscape where momentum and contrarian strategies can yield asymmetric returns. Two stocks-Arcutis Biotherapeutics (ARQT) and General Electric (GE)-stand out as compelling cases for such analysis. Their trajectories reflect contrasting dynamics within the biotech and industrial sectors, offering insights into how volatility, regulatory shifts, and operational execution can create asymmetric opportunities.

ARQT: Momentum in Biotech, But Is the Rally Sustainable?

Arcutis Biotherapeutics has emerged as a poster child for momentum-driven investing in 2025. The stock surged 112.6% year-to-date and 164.4% over the past twelve months, driven by a combination of regulatory milestones, clinical progress, and commercial success. Q3 2025 results underscored this momentum: net product revenue reached $99.2 million, a 22% sequential increase and 122% year-over-year jump, fueled by strong demand for its flagship product, ZORYVE. The company returned to profitability with a non-GAAP EPS of $0.06, a stark contrast to a $41.5 million net loss in Q3 2024.

The biotech sector's outperformance in 2025-exemplified by the iShares Biotechnology ETF (IBB) rising 30.2% over six months-has created a favorable backdrop. Arcutis's valuation appears undervalued relative to peers, with a P/S ratio of 11.18x versus the industry average of 12.08x according to analysis. A discounted cash flow analysis suggests the stock is undervalued by 55.5%, and management's 2026 guidance of $455–$470 million in net product revenue further reinforces optimism.

However, momentum-driven rallies often invite scrutiny. While Arcutis's pipeline advancements-such as Phase 2 trials for ZORYVE in vitiligo and hidradenitis suppurativa-position it for long-term growth, the stock's valuation is no longer a bargain. Analysts have set an average price target of $31.63, implying a modest 1.92% upside. For contrarian investors, a pullback could present an entry point, but the stock's trajectory suggests it is already priced for continued success.

GE: Contrarian Appeal in a Resilient Industrial Giant

General Electric's Q3 2025 results highlight the resilience of industrial stocks in a challenging macroeconomic environment. GE Aerospace reported revenue of $12.2 billion, a 24% year-over-year increase, with operating profit rising 26% to $2.3 billion. The company raised full-year guidance to $8.65–$8.85 billion in operating profit, driven by robust demand in commercial engines, defense contracts, and supply chain improvements. Strategic partnerships, such as its collaboration with BETA Technologies for hybrid electric propulsion, signal a long-term commitment to innovation.

Despite these strengths, the industrial sector has lagged behind biotech and the S&P 500. In Q1 2025, industrials returned -0.5%, underperforming the S&P 500's -4.6% as defensive sectors like healthcare outperformed. GE's valuation appears stretched relative to the broader market: its current P/E of 39.3x and forward P/E of 41.84x exceed the S&P 500's forward P/E of 22.3x. Yet, analyst price targets suggest confidence, with a median target of $345.0 and a high of $386.0.

For contrarian investors, GE's premium valuation may seem unattractive. However, the company's operational execution-evidenced by 28% growth in services revenue and 83% year-over-year defense deliveries-suggests it is well-positioned to capitalize on long-term trends like AI adoption and defense spending. If the industrial sector's underperformance is a temporary correction rather than a structural shift, GE could offer asymmetric upside.

Sector Dynamics: Biotech vs. Industrials in a Volatile Market

The biotech sector's outperformance in 2025 has been fueled by regulatory tailwinds, lower valuations, and a Fed pivot toward rate cuts. In contrast, industrials face headwinds from trade tensions and manufacturing sector delays according to analysis. Yet, GE's strong Q3 results demonstrate that industrial stocks can thrive if they align with macroeconomic trends.

The S&P 500's volatility-marked by a -4.6% return in Q1 2025 according to data-underscores the importance of sector rotation. Defensive sectors like healthcare have outperformed, while industrials and technology have faced headwinds. For investors, this divergence highlights the need to balance momentum plays (e.g., ARQT) with contrarian bets (e.g., GE) to hedge against macroeconomic risks.

Conclusion: Balancing Momentum and Contrarian Logic

Arcutis Biotherapeutics and General Electric represent two sides of the same coin: ARQT embodies the momentum-driven optimism of a high-growth biotech sector, while GE offers a contrarian play on industrial resilience. For ARQT, the key question is whether its valuation can sustain its rally amid regulatory and competitive risks. For GE, the challenge lies in justifying its premium valuation in a sector that has underperformed.

In a market defined by volatility and divergent sector performance, investors must weigh these dynamics carefully. ARQT's momentum suggests it is a buy for those comfortable with growth at a premium, while GE's fundamentals present a compelling case for contrarians willing to bet on industrial sector recovery. Ultimately, both stocks underscore the importance of aligning investment strategies with macroeconomic narratives and sector-specific catalysts.