Recently, Weatherford International (NYSE: WFT)
sold drilling assets in Russia and Venezuela to further transition
away from unprofitable businesses that never achieved the expected
margins. Investors can quickly compare the numbers to the solid
international margins of Schlumberger Limited (NYSE: SLB) and Halliburton (NYSE: HAL) to quickly grasp how far off course Weatherford had steered in the process of expanding internationally.
The oilfield services laggard has turned to improving operations
after a few years of working out accounting and tax issues. Weatherford
has taken several previous steps to improve operations with the hopes of
growing margins. Even after the recent gains in the stock, Weatherford
continues to trade at low revenue multiples, showing how much of an
impact the low-margin drag has had on the stock.
A couple of notable trends are making investing in the
domestic wireless space a concern. The stocks trade at multiyear highs
and a pricing war triggered by T-Mobile (NYSE: TMUS) is causing average revenue per user, or ARPU, to decline -- at least in the case of AT&T (NYSE: T)
. The combination usually doesn't go hand in hand , especially
considering the domestic market is virtually saturated with users,
causing Verizon Communications (NYSE: VZ) to struggle with customer additions since it hasn't entered the pricing wars.
Any pricing war should always alert investors to pending stock
losses, but with AT&T trading sideways for nearly two years now do
investors really have cause for concern?
With once struggling domestic wireless provider T-Mobile US (NYSE: TMUS)
now worth over $26 billion, investors should wonder if the stock has
any value left. The company is rumored to be a buyout target of Sprint (NYSE: S), yet its quick rise from $7.50 to nearly $33 in a span of two years should raise valuation questions.
On the backs of wireless mergers, including its own consolidation with Metro PCS,
T-Mobile is now secure in a strong fourth position of the domestic
wireless market. The stock now trades at nearly 1 times revenue
estimates, suggesting that all of the easy money has already been made.
Further, notable investor firm Omega Advisors exited its position during
the first quarter further, questioning if the stock has upside value.
The amount of long-term growth forecasted by Antero Resources Corporation (NYSE: AR)
is almost unheard of outside of social media stocks, especially for a
company with a greater than $15 billion market cap. The Marcellus and
Utica Shale natural gas exploration and production firm is probably
mostly unknown by investors after going public last October.
Despite production growth rates of over 100% and heading toward
nearly 950 MMcfe/d during 2014, the company continues to forecast growth
rates in excess of 50% in both 2015 and 2016. At this point, Antero
appears to be overcoming the infrastructure bottlenecks that have
disturbed Marcellus production by Cabot Oil & Gas (NYSE: COG) and Utica growth at Gulfport Energy Corp (NASDAQ: GPOR). The biggest question is whether the growth at Antero can be maintained as guided.
The recent collaboration deal with Cisco Systems (NASDAQ: CSCO) sparks an interest in investing in Jive Software (NASDAQ: JIVE)
again. The social business software provider offered an interesting
investment concept when it came public back at the end of 2011, yet the
company hasn't been able to match the success of the consumer social
The software provider is focused on the social business platforms of
portals, social intranets, and external communities that allow employees
and customers to better collaborate and engage. Unfortunately, Jive
Software has yet to hit the tipping point, with revenue growth only
clocking in at 21% in the first quarter.
With the spin-off from Chesapeake Energy (NYSE: CHK) finally here, investors can start watching Seventy Seven Energy (NYSE: SSE). The oilfield services firm has had limited publicity typical of
spin-offs, providing the opportunity for an attractive valuation.
One important thing investors need to understand about spin-offs is
that the new companies typically come out in disarray. The parent
company wouldn't typically perform the split up if it weren't for a
desire to unload an underperforming unit, or at least one viewed as
undervalued. In the case of Chesapeake Energy, the natural gas
exploration and production firm was originally hoping to sell the
company for several billion to help reduce debt at the corporate level.
The spin-off was the last option.