Chesapeake Energy's Stock Might Be Worth Zero; The 'Worst Isn't Over' For MLPs
According to a report by Barron's, the worst in MLP's "isn't over."
Barron's conclusion on the sector is based on the advice of a "brash" energy analyst, Kevin Kaiser of Hedgeye Risk Management, who "scored" with bearish calls in the past.
"We're in the early innings of the MLP down-cycle," Kaiser told Barron's. "We had a 15-year up-cycle, and now we're a year and a half into the downturn."
Kaiser continued that the MLP sector needs to "absorb more pain" before it can represent a "compelling investment." The analyst added that the "pain" can only come in one form: a reduction in distribution that many retail investors cherish.
Kaiser gained the attention of the Street as he was the only bear among more than 20 analysts that covered Kinder Morgan Inc (NYSE: KMI). In fact, the analyst was mocked by Kinder Morgan's management who said during a conference call in 2014: "You sell, I'll buy. And we'll see who comes out best in the long run."
Kinder Morgan's stock was trading at $35 per share at that time and boasted a market valuation of around $100 billion. On Monday, the stock was trading at $14.65 with a valuation just north of $32 billion.
Kaiser: Chesapeake Energy Is A $0 Stock
Barron's also highlighted Kaiser's bearish call on Chesapeake Energy Corporation (NYSE: CHK). According to Barron's, the analyst issued a Sell recommendation when the stock was trading at $13 last June given the company's "unfavorable transportation contracts with pipeline operators."
Kaiser even suggested that shares of Chesapeake Energy, along with Linn Energy LLC (NASDAQ: LINE) "could be going to zero."
Chesapeake Energy's stock hit a new 52-week low of $1.50 on Monday following reports that the company hired restructuring experts.
Shares of Linn Energy also hit a new 52-week low of just $0.31 on Monday.
"And I think we're going to be right," Kaiser confidently concluded in his price targets.
Chesapeake was halted eight times on Monday, as of 12:05 p.m. ET.
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