Davidson is tossing extreme shade on a stock, which has, hitherto, enjoyed fantastic gains in 2016. To translate what they’re saying, in the clearest of terms: they don’t get it.
This company is offal and only one outcome is likely. Such an outcome is indelibly grim, especially from current levels.
DA Davidson wants you to sell.
Emerge Energy Services: Living on a prayer, starting to only see binary outcomes – DA Davidson
DA Davidson notes EMES’ stock price has increased over 200% since reporting horrendous 1Q16 results (lowest utilization across coverage universe) and confirming a covenant breach under its revolving credit facility. At that time, we still saw the light and expected cost reductions and a quick fuel segment sale to enable an amendment to its credit agreement, with enough liquidity to weather the downturn. Today they’re less sanguine about the fuel business fetching a meaningful sale price or the outlook for a company with the highest cost structure in our coverage universe being able to compete in a low cost “secular” sand demand environment. We reiterate our underweight rating and their $5 target based on a 2018 EV/EBITDA multiple of 8x. Their multiple is toward the low end of EMES’ historical range but it still might be optimistic given growing uncertainty in our estimates and increasing expectations for binary outcomes for EMES.
The stock is ignoring this hit piece today.
Amazing how the US energy sector has levitated for so long with oil down 2/3 from high. Nutz.
damn…i remember in 2014 when this at 70. was contemplating shorting it . everything that goes up too much to chopped to size in this market. nothing holds gains unless it’s AMZN or FB lol
What the fuck is going on with vix today?
today is weird, as most Fridays are.. All the $ going into energy, drilling,oil and out of bonds and everything else
Fuck must be experation. But junk outperforming high grade on a down day.