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Why Does Nabors’s Stock Price Look so Bearish?

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Aug. 17 2017, Published 3:54 p.m. ET

Nabors Industries versus peers and industry

Nabors Industries (NBR) is one of the largest land-based drilling operators in the world, but it has had a weak run on the stock market in 2017. On August 16, 2017, NBR was trading at $6.27, which is ~62% lower YTD (year-to-date).

The VanEck Vectors Oil Services ETF (OIH) has fallen 34% YTD. OIH is an ETF that tracks an index of 25 OFS (oilfield services and equipment) companies, and NBR makes up 2.6% of OIH. Schlumberger (SLB), the largest OFS company in the US, has lost ~24% YTD.

WTI (West Texas Intermediate) crude oil has fallen 10% YTD, and the lower price of crude has negatively affected NBR as well as peer Weatherford International (WFT).

By comparison, the Dow Jones Industrial Average (DJIA-INDEX) has risen 11% YTD.

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What does Nabors’s stock price movement tell us?

Nabors’s one-year stock price was trending up until January 2017, when it started to lose steam and decline. Although NBR’s top line and bottom line improved in 2Q17, its free cash flow has been in the red for the past two quarters.

The weakness in the price of crude oil in 2017 has also added impetus to NBR’s stock price fall this year. Despite its merger agreement with Tesco (TESO) on August 14, NBR’s weak stock run has continued.

Nabors’s moving averages

On August 16, Nabors stock was trading at a ~19% discount to its 50-day MA (moving average) and 49% below its 200-day MA. The MA exhibits a smoother trend in the stock’s price movement.

Notably, NBR’s short-run MA has crossed below its long-run MA since the second week of May 2017. This implied bearishness has affected NBR’s stock price, which has dropped below its short-run MA since February. This indicates that NBR’s share price is facing a short-term headwind as well. A 50-day MA is a short-term MA, while a 200-day MA exhibits a long-term trend.

Next, we’ll discuss Nabors’s latest management comments.

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