Shares of Nine Energy (NYSE:NINE), an oilfield services provider that offers completion services to E&P (oil and gas exploration and production) companies, have surged over 427% in three months, outpacing the benchmark index by a wide margin. Higher price realizations and an increase in unconventional resource development activity are behind the surge in its stock price.
The company is strategically increasing its prices across all its services. Meanwhile, the demand for its products and services, especially its cementing services, remains high, supporting its financials. Moreover, the company is focusing on deleveraging its balance sheet, which is positive.
It’s worth highlighting that NINE’s business depends upon the onshore oil and gas companies’ level of capital spending and well completions. Lower capital spending by oil and gas companies could pose challenges.
However, management is confident and expects to benefit from its geographic and service line diversity. Further, constraints on oilfield service equipment and incremental rig activity are expected to support pricing and, in turn, its financials even if there is no significant increase in resource and well development activity.
Is Nine Energy Stock a Buy or Hold?
Ignacio Bernaldez of EF Hutton has rated NINE stock a Buy due to its geographical diversity and capital-light business model. His price target of $15.50 implies a further upside of 12.65% from current levels. As NINE stock has skyrocketed, insiders sold it. TipRanks’ data shows that insiders sold NINE stock worth $3.8M in the last three months. Meanwhile, hedge funds bought NINE stock worth $90K.
Nine Energy stock has a “Perfect 10” Smart Score on TipRanks. (Stay abreast of the best that TipRanks’ Smart Score has to offer).
Bottom Line
Nine Energy is well-positioned to capitalize on the increased resource development activity and higher spending by oil and natural gas companies. Its stock has outperformed the broader markets by a wide margin and is poised to deliver strong returns in the coming months.
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