Gazprom stock price plunges on second wave fears

Gazprom stock price plunges on second wave fears
Written by:
Stanko Iliev
15th October, 20:20
  • Supplies to Europe from January to June increased by 17% year-on-year
  • Poland's antitrust agency slaps a $7.6B fine on Gazprom for building the Nord Stream 2 gas pipeline
  • The price of the stock is also impacted by the fears of the COVID-19 environment

Gazprom shares have weakened from $4.87 to $4.19 in less than thirty days and the current price stands around $4.21. The price of the stock is impacted by the Covid-19 pandemic environment and the technical picture implies that the price may fall to $4 very soon.

Fundamental analysis: Gazprom plans to increase exports in Europe and China

Gazprom (OGZPY) is a global energy company that holds the world’s largest natural gas reserves. The company accounts for 12 % of the global gas output and 68% of domestic gas production.

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In only several months the price of this stock has weakened from $8 below $4.2 and the recent sell-off created an attractive opportunity to invest in this stock. According to the latest news, suppliers from the US could start to export liquefied natural gas (LNG) to the European market.

The head of the company’s exporting division Elena Burmistrova sees this as a threat of more U.S. sanctions against the Gazprom-led Nord Stream 2 gas pipeline project. Gazprom expects its gas exports to Europe to be at least 170 billion cubic meters (bcm) in 2020, compared with 199 bcm in 2019.

Supplies to Europe from January to June increased by 17% year-on-year and the company will continue with this trend in 2021. Gazprom supplied China with 300 million cubic meters of gas in 2019 and the positive news is that company plans to increase exports to China in the upcoming years.

Shares of Gazprom could be a very good investment option and most financial analysts are also expecting its price to rise considerably in the next several years. If we compare total stockholders’ equity of $232B and the market capitalization of $50.8B we can notice that this stock is undervalued.

Gazprom decreased its profit in 2019 to $19.3B from $20.8B in 2018 but the growth projects will ensure that the numbers will be moving up in the future. If you decide to trade Gazprom shares this October you should have in mind that there are several negative facts that are connected with this company.

Poland’s antitrust agency slaps a $7.6B fine on Gazprom for building the Nord Stream 2 gas pipeline to Germany. According to Poland’s antitrust agency, this project hurts Polish consumers and increases Europe’s dependence on Russian imports.

Gazprom also reported that Q2 net profit fell 17% Y/Y but the main reason for this is connected with the economic fallout from the spread of the Covid-19.

Technical Analysis: Gazprom stock has a very good risk/reward ratio

In my opinion, this stock has a very good risk/reward ratio and investors in Gazprom stand to gain a lot more for taking a comparatively smaller risk. On this chart, I marked current resistance and support levels.

Data source: tradingview.com

The current supports levels are $4 and $3.5, $5 and $6 represent the current resistance levels. If the price jumps above $5 it would be a signal to buy Gazprom stock and we have the open way to $5.5.

Rising above $6 supports the continuation of the bullish trend and the next price target could be located around $5. If the price falls in the upcoming period, every price in a range from $3- $4 could be a very good opportunity to invest in Gazprom stock.

Summary

With a market cap of only $50.8B, Gazprom continues to be one of the most undervalued energy stocks on the market. According to the latest news, suppliers from the US could start to export liquefied natural gas (LNG) to the European market but Elena Burmistrova sees this as a threat.

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