Stocks followed crude oil prices lower today, though oil has a commanding lead in that race. Crude prices fell to multi-year lows on Wednesday, sparking concerns that the global economy is just one or two bad days away from imploding itself.
The worst of the worst bearish offenders were Sprint Corporation (S), Atlas Pipeline Partners, L.P. (APL), and Wynn Resorts, Limited (WYNN), with each adding to substantial losses already suffered over the course of the past few days.
Sprint Corporation (S)
Just one day after T-Mobile US Inc. (TMUS) was found on the “Worst 3” list, competitor Sprint Corporation was one of the market’s worst performers with its near-5% stumble.
The reason? A downgrade, mostly. Oppenheimer reported this morning that it was downgrading S stock from a “market perform” to an “underperform.” Oppenheimer analysts Timothy Horan and Jonathan Michaels noted with the downgrade:
“We believe Sprint will be the most negatively impacted by competitive responses, and we think the stock is overvalued after factoring in $8B in expenditures for the broadcast spectrum auctions. Now trading at 8.8x our 2016E EBITDA estimate, which is nearly a 2x premium to the carriers, and not justified given negative FCF. We believe additional share issuances are on the horizon and will cause further equity dilution.”
In other words, like T-Mobile, Sprint is starting a price war it really can’t afford to wage.
Atlas Pipeline Partners, L.P. (APL)
The oil rout was back in full swing Wednesday, with crude prices falling nearly 5% to a price near $60.90 per barrel. That’s the lowest price we’ve seen for crude oil since 2009, with no end in sight. And once again, investors are dumping any stock even remotely related to oil, whether they deserve the drubbing or not. Case in point? Atlas Pipeline Partners. APL stock was down more than 12% today, pulling shares down to a total loss of 33% in just the past two weeks.
The irony is, of all the companies that are relatively well shielded against a pullback in oil and gas prices, Atlas Pipeline Partners belongs near the top of the list. While prices may be plunging, usage of gas and oil hasn’t wavered. In fact, low gas and oil prices could mean growing demand. That leaves a middleman like Atlas Pipeline Partners, L.P. better positioned than most realize.
Wynn Resorts (WYNN)
Still in a freefall that began last week, Wynn Resorts shares fell another 6% today. The selloff was rekindled by news that FBR Capital had lowered its price target for WYNN stock to $165, from a previous target of $195.
Though the revised FBR price target wasn’t accompanied by any specific rationale, it stands to reason that early-December news of waning casino activity in Macau remains one of the key concerns. WYNN stock has fallen more than 14% since Forbes published the dire data regarding Macau’s gambling revenue slump, and the pace of selling seems to be picking up now that global economic worries are starting to surface.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
