Schlumberger Limited Has Rewarded Bears
Schlumberger Limited (NYSE: SLB) shares have dropped precipitously along with the price of crude oil recently.
With the chart of crude indicating even lower prices eventually, how bullish can one get on Schlumberger? On the other hand, the short side of crude oil is a very crowded trade at this point, making violent upside moves a real possibility on any piece of bullish news. Is it wise to be short this stock right now?
What The Bulls See
- A leading oil services firm that should continue to benefit from a general rise in oil prices over time.
- A reasonably valued energy leader: its price-to-sales of three is well below the “cheap” threshold at five, and its enterprise value is greater than its market capitalization,
- The balance sheet for Schlumberger is a plus as well, with a current ratio of more than two and a strong cash position of $6.7 billion
- The bulls see a price chart for shares that points to higher prices over the long run.
What The Bears See
- A stock that for better or worse is tied to the movements of crude oil, and right now it's for worse.
- A company that is fairly valued at best and slightly expensive at worst, especially when looking at the P/E-to-growth ratio of approximately one or the price-to-book of more than three.
The Technical Take
Schumberger shares are in the midst of a short-term bear condition and will likely stay that way until crude oil stabilizes. The stock is currently threatening to break down below the intermediate-term uptrend line at around $101.50-$101.75. The real target, even for the bulls, is down at the $97.65-$100.06 range. Technicians note that the wise stance for traders is to cover shorts at $100.10 and to try to initiate long positions down at $97.65.
Schlumberger is a great oil services company that will likely reward its shareholders handsomely over the long run. However, the short term is not nearly as bullish as the long term, with a likely drop to around $100 still in the cards.
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