Shares of oil and gas equipment supplier and supply chain manager Now Inc. (NYSE:DNOW) rose as much as 12.6% today and were up 5.9% as of 1 p.m. EDT. The big move comes after analysts at Stifel upgraded the stock's rating to buy and increased its price target to $12.
According to the accompanying report from Stifel, the analysts believe that spending in the oil and gas patch is expected to increase in the coming quarters and should put the wind in Now Inc.'s sails. That will be welcome as revenue has been hit hard by several down years in the oil patch since it went public in 2014.
The thing that should make investors optimistic is that the business isn't directly tied to commodity prices. Rather, it's more reliant on how much exploration & production, transportation & logistics, and refining & marketing companies have to spend in various activities to maintain or grow their business -- think disposable parts for a rig, like drilling pipe and drill bits or pumps.
It's hard to get too excited as an investor about analyst upgrades and price targets because they are so short-term in nature. From a long-term investing perspective, the stock hasn't been a great performer. Some of that isn't necessarily management's fault as the 2014-2021 period has been an absolutely brutal time to be in the oil and gas business.
Despite shares losing about 69% since going public, the business has made some promising strides. It has been a serial acquirer of distribution and supply chain companies while having no debt on the balance sheet and about $300 million in cash on the books. So should business start to pick back up, as Stifel is predicting, we might start to see how Now Inc. can operate in a less challenging environment.