Imperial Petroleum (NASDAQ:IMPP) is another meme stock whose 15 minutes of fame have already quickly evaporated. In the past, when the market was hot, these meme stocks could rally for months on end. This is because the liquidity and sentiment were extremely favorable.
The sentiment was so bullish that almost any stock would immediately pop upon favorable news. That was in the past though. The conditions in the market now are incredibly brutal.
In fact, the astounding rally of IMPP stock from 50 cents all the way to $7.50 only lasted about two weeks. By the end of March, IMPP stock fell about 80% from its highs. Therefore, it is important to know exactly what you are buying.
Imperial Petroleum is in the business of petroleum shipping. So at first glance, the news that Morgan Stanley (NYSE:MS) revised its oil forecast seems good for the company. The investment bank increased its forecast by $10 per barrel. The main reasoning is higher supply deficits due to continued Western sanctions on Russia.
Morgan Stanley sees Brent crude having a supply gap of 1 million barrels. It sees an average of $130 per barrel in the third and fourth quarters of this year. This is all fantastic news for oil producers and explorers. However, Imperial Petroleum is not an oil producer rather it is a tanker company.
Specifically, based on the company’s website, it is an “international shipping transportation company specialized in the transportation of various petroleum and petrochemical products.” Therefore there is little reason that it will continue to rise up from these levels. In fact, the amount of fuel that needs to be shipped could actually decrease. This is because while the price of fuel remains high, demand will be tempered thus reducing the shipping price for the fuel.
I believe that the price spike to $7.50 was a one-off for IMPP stock. I don’t expect the stock to reach that level again anytime soon.
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On the date of publication, Joseph Nograles 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.