Noble Energy was a great stock for investors quite a while ago. However, since 2013, we've seen declines in the value of the stock. However, at some point, any stock that is declining is eventually going to reach support. So now, the big question surrounding Noble Energy is “How low will it go before it starts to reach support?” Today, we'll discuss Noble Energy's second quarter earnings report, current market conditions and whether or not we can expect to see a reversal in the stock any time soon.
Noble Energy Earnings
As with just about any other company in the energy sector, the earnings released by Noble Energy were far less than desirable. Here's what we saw from their report last week…
- Top-Line Revenue – Top-line revenue proved to be a big miss. While analysts expected the company to report revenue in the range of $890 million for the quarter, the company actually reported $160 million less than expected; coming in at $730 million.
- Earnings Per Share – When it comes to earnings, the company produced better than analysts expected. In the quarter, Noble Energy produced $0.26 per share; beating analyst expectations by about 33%.
Energy Market Conditions
The energy sector as a whole has been hit hard recently. After the value of oil fell dramatically in late 2014, investors expected that they had seen the worst of it and that the value of oil would rise over time. Although it did during the first part of the year, lately we've seen major downtrends in the value of the commodity lately as a result of three big issues…
- Supply Glut – First and foremost, the issue that caused the declines in the first place back in 2014 hasn't yet been solved. The reality is that the world is producing far more oil per day than it is using. As a matter of fact, we are currently producing about 2 million barrels more per day than we use. Considering the basic law of supply and demand, this can only cause one thing… a decline in value.
- Worldwide Economic Conditions – It's no secret that economic conditions around the world are becoming more and more grim. Recently, Greek became the first developed country ever to default on an IMF loan payment. Even more recently, the health of the Chinese economy has come into question. The reality is that around the world, several countries are facing major debt issues. As a result, demand for oil declines; ultimately leading to a reduction in value.
- Geopolitical Conditions – Finally, settling geopolitical conditions between the United States and Iran are leading to more issues. As the US and Iran come to an agreement; sanctions on Iran are likely to be lifted. When this happens, Iran will flood the oil market with hundreds of thousands of more barrels of oil per day. This will further the supply glut; ultimately causing more declines.
Putting It All Together
The reality is that the energy sector is highly dependent on the value of oil. If oil continues to fall, Noble Energy, along with any other company in the energy sector, is going to have a hard time impressing investors; leading to more declines in the value of the stock. Therefore, binary options traders have several opportunities here. By looking for small gains that lead to resistance and buying put options, traders can ride the trends down to profit; and considering that the entire energy sector is affected, there's quite a bit of profit to be made. Not only can traders use this strategy to profit on Noble Energy trades, they can take advantage of correlating assets in the market. For example, both oil and Exxon Mobil are likely to follow the same trends; giving traders more and more opportunities.
What Do You Think?
Where do you think Noble Energy is headed and why? Let us know in the comments below!
Keep informed and check out the latest financial news