UPDATE: Bernstein Downgrades Offshore Drillers to Market Perform, Suggests Long Term Investors Leave (ESV, NE, RIG)
Gruber noted that the growth of supply has outpaced demand and that high versus low spec bifurcation should prove temporary. The analyst suggested that “the valuation of high spec assets suggests simply playing high spec rigs (SDRL) is highly risky should the cycle turn more dramatically.”
• Goldman Sachs analyst Waqar Syed reiterated a Neutral rating on Thursday after meeting with Senior Management. Syed noted management's focus on continued growth and financial performance. Goldman Sachs said that frustration with stock performance was evident by management.
• Stephens & Co. reinstated NE's rating of Overweight Friday. The analysts announced a $49.00 PT.
• Last week, Credit Suisse analyst Gregory Lewis upgraded the rating on RIG from Neutral to Outperform and reiterated a $60 PT. Lewis noted “bifurcation of 4/5th gen rigs is finally baked into forward earnings and expect management's cost cutting initiative to push margins higher.”
Bernstein advised that “long term investors should exit the group and short term investors focus in catalysts and sentiment” as “offshore drillers are at the beginning of the end of the cycle.”
On Thursday, ESV closed at $56.71, NE closed at $39.34 and RIG closed at $47.39.
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