Today, investors in Transocean (NYSE:RIG) are seeing some impressive upside momentum. At the time of writing, RIG stock is up more than 14% amid intense volatility, which is mostly to the downside today.
Much of this downside volatility has been related to higher energy prices in recent days. Today, the price of WTI crude surged to the $130 level, the highest since 2008. For companies engaged in the drilling and exploration behind the oil and gas scene, that’s a great thing.
Transocean is one of the most prominent players in offshore drilling. This company’s full-service approach to this sector is something many major oil players use to increase production. With calls for more output increasing, the expectations are that Transocean’s pipeline of business may be filling (no pun intended).
When oil prices surge, as they have in recent months, expectations that more supply will hit the market tend to drive outsized volatility in companies like Transocean. This stock is one that’s still down more than 95% from its peak during the previous oil boom in 2008, despite prices being around where they were during that boom.
Let’s dive into what investors are watching with Transocean right now.
What’s Behind Today’s Surge in RIG Stock?
Of course, rising oil prices provide a big boon for companies like Transocean. However, how investors and analysts foresee these factors affecting Transocean’s bottom line isn’t as clear.
One of the more bearish analyst groups on RIG stock of late has been Piper Sandler. The equity research analysts at Piper Sandler had previously placed a $1 price target on Transocean along with a “hold” rating. However, these analysts tripled their price target today to $3 per share.
Now, RIG stock is currently trading near $5 per share. Accordingly, this price target still implies a significant amount of downside from here. That said, even the most bearish analysts on anything energy-related are having to change their tune, as the outlook for energy prices has shifted so dramatically.
Whether these analyst adjustments we’re seeing of late are lagging indicators, or predictive instruments to be used by investors, is always a discussion that will be heated. However, it’s clear that Transocean’s fundamentals have improved in this environment. Thus, those looking for more leveraged exposure to energy prices are looking at RIG stock today. Makes sense.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
