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Why Citi Group Downgraded Diamond Offshore to a ‘Sell’

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Dec. 4 2020, Updated 10:53 a.m. ET

Stock performance

Diamond Offshore (DO) closed at $14.47 on October 12. Over the last month, DO’s stock has had a good run with a 16.3% return. However, the stock is down 15.25% from its price at the start of the year.

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Consensus rating

The consensus rating for Diamond Offshore is 3.16, which means a “hold.” Noble Corporation (NE) has a consensus rating of ~3.03, which means a “hold.” Rowan Companies (RDC) has a consensus rating of ~2.63, which also indicates a “hold.” Ensco (ESV) and Transocean (RIG) have consensus ratings of 2.6 and 2.86, which means two “holds.”

Consensus recommendations

Currently, 31 analysts have recommendations on Diamond Offshore. At the beginning of the year, 35 analysts covered the stock. Of the 31 analysts, one analyst says “strong buy,” four analysts say“buy,” 17 analysts say “hold,” seven analysts say “sell,” and two analysts say “strong sell.”

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Recent changes

On October 12, Citigroup downgraded Diamond Offshore to “sell” from “neutral.” On October 10, Deutsche Bank initiated coverage on Diamond Offshore with a “hold” rating and a target price of $15. Bank of America Merrill Lynch downgraded the stock to “underperform” on October 9.

Also, in September, many analysts revised their recommendations and target prices on Diamond Offshore. UBS upgraded DO to “buy”  from “neutral” and raised its target price to $15 from $12. Jefferies raised its target price to $14 and maintained a “hold” rating.

Target price

The stock has a 12-month consensus target price of $13.03. Compared to the market price on October 12, the stock has a potential downside of 10%.

Diamond Offshore Drilling is set to report its 3Q17 earnings on October 30. In the next part of this series, we’ll see what analysts expect DO’s revenue and EBITDA to be in 3Q17.

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