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One More Downgrade Comes in for Diamond Offshore

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Updated

DO’s analyst recommendations

Diamond Offshore (DO) was the best performer among its peers in terms of market returns in 2017. However, analysts are not very bullish on this stock.

Of the 32 analysts covering Diamond Offshore (DO), only 9% recommend a “buy” or equivalent for the stock. Among the top offshore drilling stocks (XLE), Diamond Offshore has the lowest percentage of “buy” recommendations, with 50% of its analysts rating the stock a “hold.”

The remaining 41% recommend a “sell” for Diamond Offshore stock. Its consensus 12-month target price of $19.93 implies a downside of 27.6%, based on its current market price of $19.9 on January 11, 2018.

In the preceding part of this series, we discussed how analysts have slowly turned bullish on Ensco (ESV). However, this has not been the case with Diamond Offshore. One year ago, in January 2017, 11% of its analysts gave a “buy” or some equivalent recommendation for DO.

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Recent analyst changes

While it’s important to look at analysts’ current ratings, recent changes to recommendations and target prices provide insight into the latest changes in the market sentiment for a stock.

In January 2018 Simmons downgraded Diamond Offshore to “underweight” from “neutral.” Jefferies downgraded the stock to “underperform,” and Piper Jaffray downgraded the stock to “neutral.”

Target price

On January 12, 2018, Wells Fargo raised its target price for Diamond Offshore to $18 from $15, and Susquehanna raised its target price for DO to $17 from $16. Earlier the same day, Simmons raised its target price to $10 from $9.5, and Cowen and Company raised its target price to $18 from $11.

Cowen also raised its target price for Ensco (ESV), Transocean (RIG), Noble (NE), and Rowan (RDC). Notably, with Brent prices well above $60, international and offshore projects could begin to accelerate, according to the lead analyst at Cowen.

Earlier in January, Citigroup raised its target price for DO to $13 from $12, and Credit Suisse raised its target price to $15 from $13 and maintained “neutral” rating.

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