Please ensure Javascript is enabled for purposes of website accessibility

Weatherford International's Stock Continues Its Wild Ride, Plunging 30%

By Tyler Crowe - Updated Apr 10, 2019 at 8:23PM

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

Here we go again...

What happened

Shares of oil services giant Weatherford International (NYSE: WFT) are down 30.2% as of 2 p.m. EST today. While there has been no particular news pertaining specifically to the company, today is just another day for a stock that has repeatedly posted price swings of 20% or more over the past few weeks. The company's stock has declined more than 90% this past year alone and is now in penny stock territory.

So what

It's strange that one of the 10 largest oil equipment and services companies in the world with $5.8 billion in annual revenue has become penny stock fodder. The issue that has landed Weatherford in this place has been years of mismanagement. For much of this decade, the company has gone through numerous iterations of corporate restructurings and "right-sizing" the business. The company has suffered for years because of a lack of cost control, incredibly high levels of working capital, and the inability to generate cash flow. It has had to supplement those cash gaps with a steady drip of debt that has simply become unmanageable. 

Rig workers and oil pumps in silhouette

Image source: Getty Images.

Weatherford's current CEO Mark McCollum has tried to fix Weatherford's cash and debt issues by selling off assets, cutting costs, and getting the company ready for an uptick in capital spending outside of North America. The slow recovery of international drilling activity, though, likely has Wall Street worried that it won't be able to service its debt before it can get enough new business. As a result, its stock is now a penny stock, and its corporate debt trades for half of its par value. When a company's bonds trade for a significant discount to their par value, it is a sign that some investors think the company could default on that particular bond.

Now what 

Weatherford's stock price is so low that it received a notice from the New York Stock Exchange that its shares are no longer in compliance with its listing standards (a stock can't trade below $1 for 30 consecutive days). So chances are company management will have to do something. That could be as simple as a reverse split to reduce its share count. 

Whatever it is, though, the overarching theme for long-term investors is to stay away. This company looks to be teetering on the brink of solvency, and it will take an incredible uptick in its business for it to keep the lights on.

Check out the latest Weatherford International earnings call transcript.

Tyler Crowe 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.

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

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

Stock Advisor Returns
377%
 
S&P 500 Returns
123%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

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.