Analyst Action: These Resource Stocks Are On Watch!
It’s Monday, and that means it’s time for a look at compelling analyst upgrades and downgrades.
In case you’re unaware, analysts at the biggest banks and investment firms on Wall Street provide research on a multitude of natural resource companies. It’s not always the case, but most times a notable bullish change in a respected analyst’s outlook can have a significant influence on a company’s share price.
Of course, their ratings changes aren’t always positive…
When an analyst applies a big downgrade, shares can lose ground quickly.
After all, it’s not a great idea to be fully invested in a company that’s falling out of favor with Wall Street. At the very least, a downgrade can slow buying activity, which opens the door to lower prices.
Either way, it’s important to keep an eye on the analyst activity. Doing so can give you a substantial leg up on the market.
Here are last week’s natural resource company ratings changes that caught my eye…
Magnum Hunter Resources (MHR)- This quickly growing Utica/Marcellus/Bakken producer had their “buy” rating and $9 price target reiterated at MLV & Co. It’s important to note MHR is in the process of divesting its remaining oil assets in the Bakken shale. Once completed (estimated early 2015), MHR will be a pure play on natural gas. MLV’s price target is 94% higher than current prices.
Newfield Exploration (NFX)- Analysts at Deutsche Bank upgraded the independent oil and gas explorer from “hold” to “buy” with a $42 price target. NFX handily beat analysts’ Q3 estimates recently with earnings of $0.52 a share. Revenues also came in higher than expected at $610 million, which is 25% higher than the same period in 2013.
Petroleo Brasileiro (PBR)- The Brazilian producer was downgraded from “buy” to “neutral” at Bank of America and from “outperform” to “market perform” at Cowen and Company. It’s very important to note that PBR is delaying their Q3 earnings results due to a growing corruption scandal.
Halcon Resources (HK)- Analysts at Wunderlich lowered their price target on the Tuscaloosa Marine Shale (TMS) producer from $9 to $5 but maintained their “buy” rating. HK has made a large (and very leveraged) bet on oil production in the TMS. But with the price of oil collapsing recently, the viability of this emerging resource play is being called into question.
Range Resources (RRC)- The top-tier US natural gas producer had their “buy” rating reiterated at Cantor Fitzgerald. With the Upper Midwest and Great Lakes regions suffering through one of the coldest Novembers on record, consumers are cranking up the heat. Investors have responded by pushing natural gas to $4.20 mmBtu, which is 16% higher than where it traded a month ago.
There you have it…
What you see above are the most captivating, and potentially profitable, ratings changes I came across over the past few days. Shares prices may already be reacting to the ratings and price target adjustments.
Now remember…
Just because an analyst has a bullish view on a company doesn’t mean you should dump all your money into the company’s stock. Do your own due diligence and always use correct position sizing and risk control measures in your trades.
If you’d like me to do the work for you, check out the Options Profit Pipeline. This one-of-a-kind options service focuses specifically on commodities and the companies producing them.
Until Next Time,
Justin Bennett
Category: Natural Resource Stocks
