Diamondback Energy (FANG) has been highlighted as the IBD Stock of the Day, nearing a buy point amidst a recovery in oil prices and rising demand heading into the July Fourth holiday. Here are some key points:
Overview:
- Primary Operations: Diamondback Energy operates mainly in the Permian Basin, the largest oil basin in the U.S., located in Southwest Texas.
- Stock Performance: Shares have been trending higher since mid-June as oil prices have rebounded, driven by increased summer fuel demand, geopolitical tensions in the Middle East, and an active hurricane season in the Gulf of Mexico.
- Oil Prices: West Texas Intermediate oil prices rose above $84 per barrel for the first time since April.
Market Context:
- Travel Projections: AAA projected a record 70.9 million Americans will travel 50 miles or more for the Independence Day holiday week, representing a 5% increase from last year and an 8% rise from 2019 levels.
- Driving and Air Travel: About 60.6 million people are expected to travel by car, up from 57.8 million last year, while air travel is projected to increase nearly 7% to 5.74 million.
Financial Performance:
- Q1 Earnings: Diamondback posted better-than-expected Q1 earnings and revenue, with a 9% increase in earnings per share and a 16% revenue growth. However, the production forecast fell short of analyst estimates.
- Merger: On February 12, Diamondback agreed to acquire Endeavor Energy with a swap of 117.3 million FANG shares and $8 billion in cash.
Stock Analysis:
- Buy Point: FANG stock is within 3% of a 211.96 buy point for a 12-week cup base. Shares have been testing their 50-day moving average and have shown positive volume trends in the past two weeks.
- Technical Indicators:
- Composite Rating: 94 out of 99, combining various technical indicators.
- EPS Rating: 86.
- Relative Strength (RS) Rating: 91, with the stock’s relative strength line trending toward its late-April highs.
Investment Insight:
- Positioning: Aggressive investors could have entered on June 24 as FANG shares broke a trendline. The current pattern suggests Diamondback Energy has potential for further growth, supported by strong technical indicators and market conditions.
Diamondback Energy’s strategic position in the Permian Basin, coupled with positive market trends and solid financial performance, makes it a notable stock to watch in the oil and gas sector.
