Recently, Oppenheimer’s analysts lowered their estimate of target price for Schlumberger Limited (NYSE:SLB), which is an oil service company. The share price was brought down to $101 from $110, yet, the company maintains the status of outperform.
Oppenheimer’s leading oil services analyst, James Schumm, says that this downfall was a result of overall lowered drilling activity in the U.S. A downward sloping trend in the activity was noticed in the oil service company, as many producers reduced their activities to bring down their spending. Discovery of idle rigs has also reduced the activities on part of the oil services companies. These factors explain why Schlumberger Limited (NYSE:SLB) has been declining in its activities and why the revenue for the company’s current quarter is considerably lower than the company’s last quarter. It is being predicted that revenues will further fall in the coming quarter.
However, this isn’t as bad as it sounds. It is expected that the decline in the activity will stop somewhere in the mid of the year. This is due to the slight stability in the drilling activity that this sector will be able to achieve by the mid of this year. Once stability is achieved, it is expected that the market will once again bounce back up. Thus, by the end of this year an increase in oil service activity is expected.
However, analysts’ predictions should not be taken as a final verdict. There are several factors that affect the market. Predictions regarding market trends are usually based on assumptions that analysts make regarding these factors, thus, there is no surety that something is bound to happen or is not bound to happen. Thus, the price targets and ratings are mere prediction, so there is nothing serious to fret about. Stability in the market can come before the mid of the year and the share price might bounce back before it is expected. There is no reason to say right now that Schlumberger Limited (NYSE:SLB) will not see a price up soon.
Investors must not solely rely upon the Oppenheimer analysts’ report as many analysts are looking at several remote possibilities as to why the shares might not bounce back or why the company’s activity rate will not improve. The report does not gives the investors a fair idea of the fact that the company certainly has chance of improvement and the activities on its part can definitely go up.
The major reason due to which nothing definitive can be said regarding Schlumberger Limited (NYSE:SLB) is that oil in itself is a very cyclical commodity, thus, anything can happen in this market sector. Thus, instead of getting hysterical over the dropping share price, this is a good opportunity for many investors to buy some more shares. Schlumberger Limited (NYSE:SLB) has been amongst the best oil services company and the investing in it would not bring any serious disappointment. Thus, while the share prices are low, it is a perfect opportunity to invest.
