Why National-Oilwell Varco Inc. Shares Slipped This Morning

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of National-Oilwell Varco  (NYSE: NOV  ) slipped slightly in pre-market trading Monday after Goldman Sachs downgraded the oil-field services giant from buy to neutral.

So what: Along with downgrade, analyst Waqar Syed lowered his price target to $85 (from $90), representing about 13% worth of upside to Friday's close. So while contrarians might be attracted to the stock's year-to-date slump, Syed's call suggests strengthening bearishness on Wall Street over its near-term turnaround prospects. 

Now what: According to Goldman, National-Oilwell's risk/reward trade-off is pretty balanced at this point. "As competition increases between new rigs entering the market and older rigs coming due for re-contracting, we see dayrates declining and hence lowering the incentive for companies to order new rigs at this point," noted Syed. "NOV has a high degree of leverage to this newbuilding cycle, and we prefer to stay on the sidelines as inbound orders will likely slowdown in 2014, and book-to-bill falls below 1.0 in 2H 2014." Of course, with the stock off about 12% from its 52-week highs and sporting a cheapish forward P/E of 11, those short-term concerns might be giving energy-savvy Fools with a solid long-term opportunity.

More compelling energy picks

Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Read/Post Comments (2) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 17, 2014, at 12:46 PM, jhf678 wrote:

    from $90 to $85 price target, which means it is still a buy.

  • Report this Comment On March 19, 2014, at 8:38 PM, TDRH wrote:

    Not a bad call. Long term holder, but would not buy more at these levels. Split of Distribution group would have been a natural short position but Miller seems to want a challenge and is going with the new entity. Do not see the spinoff sustainable without NOV OEM spare parts, but not willing to bet against it No clear play here.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2878211, ~/Articles/ArticleHandler.aspx, 9/3/2015 6:55:14 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

Today's Market

updated 9 hours ago Sponsored by:
DOW 16,351.38 293.03 1.82%
S&P 500 1,948.86 35.01 1.83%
NASD 4,749.98 113.87 2.46%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 4:02 PM
NOV $40.86 Down -0.49 -1.19%
National Oilwell V… CAPS Rating: *****