Chesapeake Energy (CHK) Stock: The Next Big News

Chesapeake Energy Corporation CHK Stock News

Chesapeake Energy Corporation (NYSE: CHK) is gaining some traction in the market this morning as the June 28, 2019 $2.50 Call option saw some of the highest implied volatility of all equity options today. While the stock is seeing modest gains of just over 3%, the market is betting that the stock could see some serious movement ahead.

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What Does This Mean?

Any trader should keep an eye on the options market. In the case of Chesapeake Energy, high implied volatility on the June 28, 2019 $2.50 Call option shows that options traders are expecting that the value of CHK stock will climb above $2.50 per share by June 28, 2019.

Considering the current trading price of $1.90 per share, this means that the market is predicting that over just the next several days, the stock will climb by more than 60%.

With such high implied volatility on this option, it suggests that the market is expecting a big event to come soon which will either cause a big rally or a big sell off.

Analyst Opinions On CHK

While the market seems to be predicting a big run in the value of CHK shares. So, what do the analysts think? Well, they seem to be along the same lines as the market.

At the moment, the average rating among analysts covering Chesapeake Energy is a Hold, according to TipRanks. However, the average price target suggests tremendous upside. At the moment, the average price target sits at $3.63 per share, suggesting that over the next year, analysts expect that the stock could climb by more than 90%.

What Is Chesapeake Energy?

Chesapeake Energy is an oil and natural gas company that invests in unconventional methods of production. The company’s methods of production allow it to maintain low, industry leading production cost in both the acquisition of oil and natural gas.

The majority of Chesapeake Energy’s production assets are in top United States on-shore locations. All in all, the company operates in 5 states across the U.S., and continues to acquire value-add assets on a regular basis.

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Consider The Risks

Any time you make an investment, you’re taking on a certain level of risk. An investment in CHK stock is no different. In my view, the risks include:

  • Oil & Gas Exposure – CHK is an oil and natural gas company. As such, it is heavily dependent on the values of oil and natural gas in the open market. After all, when the values of these commodities fall, the money that Chesapeake can make from selling their products falls as well. Unfortunately, now isn’t a great time for oil, with values seeing significant declines over the past several years. However, investments like those being made by Chesapeake at the moment could pay off in a big way in the long run as oil rebounds.
  • Earnings Declines – CHK saw significant earnings declines in the last quarter, causing the company to miss analyst expectations. Should these earnings declines continue, we could see further pain in the stock.
  • Balance Sheet – Finally, according to the balance sheet posted on Yahoo! Finance leaves much to be desired. In fact, the company is sitting with net tangible assets of more than one billion dollars in the negative.

Final Thoughts

While there are risks to consider in any stock, the options market seems to have its mind made up. It expects that Chesapeake Energy stock will see strong gains in the coming days. This, combined with analysts price targets setting the stage for a 90%+ upside makes this stock one worth watching.

What Do You Think?

Where do you think CHK is headed moving forward? Join the discussion in the comments below!

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