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Why Is Weatherford International’s Share Price Bearish?

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Weatherford International versus peers and industry

Weatherford International (WFT) is an OFS (oilfield equipment and services) company with operations around the world. On November 7, Weatherford International was trading at $3.91, which represents a YTD (year-to-date) fall of ~55%.

The Market Vectors Oil Services ETF (OIH), an ETF tracking index of 25 OFS companies, has risen 6% since the beginning of this year. Oil States International (OIS), WFT’s smaller market cap peer, has increased 3% during the same period. The entire OFS industry has been negatively affected by the energy price crash since June 2014. However, crude oil prices have recovered 22% YTD.

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What does WFT’s share price movement tell us?

In the past year, Weatherford International’s share price trended down until November 2016. WFT’s quarterly revenues and earnings in the past four quarters persistently stayed weak, due largely to the energy price depression and weak demand for OFS products and services. Its cash flows also remained negative in the past three quarters until 3Q16. 

Moving averages

On November 7, Weatherford International’s share price was at a 30% discount to its 50-day MA (moving average). It’s also trading 37% below its 200-day MA.

MAs exhibit a smoother trend following a stock’s price movement. A 50-day MA is a short-term MA, while a 200-day MA shows a long-term trend. WFT’s short-run MA has been below its long-run MA in the past one year. WFT’s share price also stayed below the long-run MA throughout the past year, which indicates strong bearishness in WFT’s share price.

In this series, we’ll analyze Weatherford International’s top-line and bottom-line growth, its various industry growth drivers, balance sheet, and valuation multiples.

Let’s move now to a look at the comments from WFT’s management.

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