With a sudden -2.1% drop to $24.45, Equinor has Wall Street wondering if its shares will keep moving past its target price of $24.34. With an average rating of hold, and analysts assigning target prices from 22.0 to 27.2 dollars per share, investors will be betting heavily on the Oil & Gas Integrated stock's next move.
The market sentiment on the stock is decidedly optimistic, since Equinor has a short interest of only 4.2%. This is the percentage of the share float that is being shorted. Each short position represents an investor's expectation that the price of the stock will decrease in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to tell how the market is perceiving a stock is to look to its rate of institutional ownership. With their vast resources, hedge funds, pension funds, and wealth managers are able to perform due diligence to a level that most investors cannot. So it follows that their investment decisions may be more educated. But we also know that bankers and portfolio managers can make mistakes too.
So the fact that Equinor has a low rate of institutional ownership at 7.0% is not an immediate red flag. It just means that something about the company has kept institutional investors from committing -- or the stock is simply flying under their radar.
To sum up, Equinor is probably the subject of negative market sentiment because of an analyst consensus of little upside potential, a hold rating, an average amount of shares sold short, and a very small number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about EQNR:
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The stock has trailing 12 month earnings per share (EPS) of $3.02
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Equinor has a trailing 12 month Price to Earnings (P/E) ratio of 8.1 compared to the S&P 500 average of 29.3
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The company has a Price to Book (P/B) ratio of 1.53 in contrast to the S&P 500's average ratio of 4.74
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Equinor is a Energy company, and the sector average P/E and P/B ratios are 18.35 and 1.6 respectively
