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Wednesday, February 20, 2013

What's Going On With GasFrac?

With today's trading, GasFrac Energy Services, Inc. (GFS in Canada and GSFVF on the Pink Sheets) managed to get back to where it started 2013.  Given that the stock had risen almost 60% after the start of the year, the fall all the way back to the starting point is truly disheartening.  In the last few days, I have gotten a series of emails from folks who want to know (1) if I think unnamed market makers are "manipulating" the price in order to buy shares on the cheap; (2) if I know of any news that could explain the plummeting price; and (3) if my view of the stock's future performance has changed.  The answer to all three questions is the same:  NO!

The price of GasFrac stock has often moved more on hopes and prayers than reality.  GasFrac was a story stock; in other words it was a company whose stock traded more on future expectations than current performance.  So long as the current performance did not convince folks that their hopes for the future were too optimistic, the stock price did okay.  After the last year and a half, however, most (perhaps all) of the optimism was beaten out of the stock.  At the start of the year, there was a spate of insider buying (albeit in small amounts) that brought some of that optimism back into the trading.  Nothing has happened that ought to have dispelled the optimism, just the passage of time.  Even so, the price of the stock fell as new "optimists" stopped buying additional shares.  Then, some of the optimists started to panic as the price continued to fall.  That is why we saw such a big decline on heavy volume.

Beyond the market psychology that affects the GasFrac stock price, there is no real news that should matter.  Indeed, the next real test for the stock will come in March when the fourth quarter earnings will be announced.  The key to that report is not the level of profit, but the size of the revenue stream.  GasFrac needs to demonstrate a reasonable work level that indicates future growth.  Absent good proof of growth, the stock will go nowhere.

I still think that GasFrac is properly rated as a hold.  The original reason for optimism about the company remains viable if management can market the services successfully.  After the earnings report, we can revisit the future of the stock.  For now, it is just a waiting game.

DISCLOSURE:  I remain long GasFrac stock.



 

 

1 comment:

fastcarken said...

Jeff, here is recent History
Dec, 4th $1.26, Jan. 24 $2.67
Today back to $1.52
This is example of Manipulation. IMHO

http://stocks.about.com/od/gettingstarted/a/041711-How-To-Legally-Manipulate-Stock-Prices.htm