Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Rice Energy Inc. Popped 19.7% in March

By Matthew DiLallo - Apr 6, 2017 at 9:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Dual catalysts sent the gas driller’s stock soaring last month.

What happened

After a lackluster start to the year, Rice Energy (NYSE: RICE) rebounded sharply in March, rallying nearly 20%. Fueling that bounce was a recovery in natural gas prices, as well as an analyst upgrade.

So what

Natural gas had been under pressure all year, especially after this past February was the warmest since 1954. By mid-March, gas had lost a quarter of its value because of an oversupplied market. However, it awoke from that slumber toward the end of March thanks in part to the triumphant return of winter, which pounded parts of the nation with a major late-season snowstorm. That storm drove up demand for gas, sending the stocks of several gas producers soaring late last month, including Rice Energy and larger rivals Chesapeake Energy (CHKA.Q) and Southwestern Energy (SWN 7.35%), which both rose more than 5%.

A natural gas drilling rig.

Image source: Southwestern Energy.

While rising gas prices helped ignite Rice Energy's rally, it wasn't the driller's only catalyst last month. The other fuel that drove the stock higher was an analyst upgrade from Stifel, which resumed coverage on the stock with a "buy" rating and a $32 price target. At the time, that price target was more than $10 above the stock's trading price. Incidentally, Stifel also initiated coverage on Southwestern Energy and Chesapeake Energy, awarding them both buy ratings and bullish price targets. In Southwestern's case, while Stifel has concerns about the company's inventory and cost structure, it likes the gas driller's current valuation. Meanwhile, Stifel thought Chesapeake Energy has top-tier assets that position it to succeed in a low-price environment.

However, not all analysts were that bullish on gas stocks. Seaport Global, for example, seemed to sour on Rice Energy at the end of the month, downgrading it from "buy" to "neutral" while lowering its price target from $28 to $26, which was still well above the stock's trading price at the time. But the analyst saw limited upside, given a long-term view that gas would remain around $2.50 per thousand cubic feet.

Now what

While Rice Energy's stock popped last month, analysts still see some upside, even if some think it's limited. Still, the driving factor for where Rice Energy goes from here is the price of natural gas. So investors who don't have an outright bullish view on gas might want to look elsewhere for opportunities, since Rice's stock could quickly give back last month's gains if the fuel cools off again. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chesapeake Energy Corporation Stock Quote
Chesapeake Energy Corporation
Southwestern Energy Company Stock Quote
Southwestern Energy Company
$7.01 (7.35%) $0.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.