Please ensure Javascript is enabled for purposes of website accessibility

Why Peabody Energy Stock Plunged 23.1% on Tuesday

By Travis Hoium - May 18, 2021 at 4:16PM

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

Yesterday's pop is nearly gone.

What happened 

Shares of coal producer Peabody Energy (BTU -0.98%) fell as much as 23.1% in trading on Tuesday after some of the euphoria in the stock yesterday wore off. Shares of the stock were still down 20.4% at 3:30 p.m. EDT but were up 6.6% for the week. 

So what

The real story today is about giving back yesterday's gains. Shares of the coal energy stock jumped yesterday because warmer than normal weather is expected in the U.S., which caused a jump in natural gas prices on hope that supply would exceed demand. Logically, if demand for natural gas is up it seems like the demand for coal should be up as well. 

Person holding coal in hands.

Image source: Getty Images.

Some of the short-term story about high demand may be right, but there's a big flaw in the bullish case for Peabody Energy. First, the spike in demand could be short-lived because the weather could turn cold later in the summer. More importantly, coal power plants across the country have been shut down for good, and there's going to be less demand for coal in the future. The chart below shows how quickly coal is declining as an energy source in the U.S. 

US Coal Consumption Chart

US Coal Consumption data by YCharts

Now what

It was speculation that sent Peabody Energy higher yesterday and when the speculative buyers disappeared the stock gains were gone as well. I wouldn't read too much into this week's moves but would pay attention to coal's trends long-term. The source of energy is in sharp decline and companies like Peabody Energy will have a very hard time surviving in the long run. 

Travis Hoium 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

Stocks Mentioned

Peabody Energy Corporation Stock Quote
Peabody Energy Corporation
$23.24 (-0.98%) $0.23

*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 08/17/2022.

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.