Why SLB Stock Popped Today
Key Points
Oilfields are getting damaged by the Mideast war.
SLB services oilfields.
That's probably a good reason to own SLB stock.
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SLB N.V. (NYSE: SLB) stock, the artist formerly known as Schlumberger, soared on Monday after Citigroup recommended buying SLB "on weakness" this morning, as StreetInsider.com reports.
SLB stock is up 6% as of 12:10 p.m. ET.
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Big trouble for big oil
We don't have much detail on why Citi decided to recommend SLB, but I think we can guess.
Priced below $47 at Friday's close, SLB stock was down 9% since before the Iran conflict began. SLB had fallen even further than that, and given how volatile oil prices have been lately, rising and falling on the latest headlines out of the Middle East, it makes sense to keep an eye out for weakness -- and good times to buy oil stocks.
More than just that, though, consider this:
As The Wall Street Journal just reported, oil infrastructure in the Persian Gulf is getting beaten up by Iranian attacks this month. One of two production lines at Shell's (NYSE: SHEL) Pearl gas-to-liquid plants -- which cost $20 billion to build -- has been "knocked out." Damage to ExxonMobil's (NYSE: XOM) natural gas facilities in Qatar could take five years to repair. Damage from a drone attack forced Occidental Petroleum (NYSE: OXY) to shut down operations at its Shah gas field in the U.A.E.
What it means for SLB stock
When oil and gas stop flowing, SLB suffers, too. Two weeks ago, the company lowered Q1 earnings guidance by $0.06 to $0.09. But here's the thing:
This short-term pain for SLB stock could yield long-term gain, if oil companies and Mideast customers need to spend the next few years repairing the damage -- and paying SLB to help. Priced below 20x earnings and with tremendous free cash flow, SLB could enjoy years of growth after this conflict finally ends.
Should you buy stock in Slb right now?
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
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