Why ProPetro Stock Sank Today
Key Points
Scotiabank initiated coverage on ProPetro stock.
Shares of ProPetro are trading at a premium to their historic valuation.
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Tumbling 3% lower yesterday from Friday's close, ProPetro Holding (NYSE: PUMP) stock continued slipping further during these waning days of September. With an analyst initiating coverage of the oilfield services provider and failing to take a very bullish stance, investors found sufficient reason to click the sell button.
Shares of ProPetro ended today's trading session 4.5% lower from where they closed yesterday.
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A sector perform rating contributed to the stock's dip
Initiating coverage with a sector perform rating, Scotiabank analyst Ian Rapp set a $12 price target for ProPetro stock. Based on shares of ProPetro closing at $9.30 yesterday, the price target implies upside of 29% -- not enough, evidently, to energize the bulls.
According to Thefly.com, Scotiabank offered commentary on more than a dozen gas and electric utilities and power producers stocks, believing that one of the alluring qualities of this group is that several stocks are available at attractive valuations.
Take an analyst's coverage with a grain of salt, but in this case...
Investors must always remember that analysts often have shorter investment horizons when issuing price targets for the stocks they cover. For this reason, investors would be well served to treat an analyst's opinion as just one data point among many regarding a stock, and to weigh the company's fundamentals more heavily.
Because ProPetro hasn't reported financial results recently, shares of the oilfield-services company hardly seem to be a compelling buying opportunity right now. Couple this with the fact that shares are trading at 6.4 times operating cash flow, a premium to their five-year average cash flow multiple of 3.5, and it seems that those seeking exciting energy stock opportunities will want to look elsewhere.
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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
