The stock has been savagely torn apart.
But is this a sign that Chesapeake Energy shareholders should be running for cover?
Not a chance. And let me explain why.
The past few weeks for Chesapeake Energy Corporation have been cringe-worthy, to say the least.
To recap… Aubrey McClendon, the company’s CEO, has come under fire amid reports of a billion dollar personal loan tied to his compensation plan.
Furthermore, there are also whispers that he secretly ran a $200-million oil and gas hedge fund while leading the ship at Chesapeake, stirring the pot over whose interest he was really looking after.
And to add more fuel to the fire, the Securities Exchange Commission just announced yesterday that they would launch an informal inquiry into the company.
But perhaps the biggest piece of dynamite placed on this Oklahoma City based natural gas conglomerate is this…
They just reported a $71 million loss in the first quarter of 2012.
The backlash has been swift.
Barclay’s Capital lowered Chesapeake’s 12-month price target to $20, down $7 from its previous target.
In fact, most analysts now claim that shares prices will drop further with Aubrey McClendon remaining at the helm…
Investors are now panicking pushing Chesapeake’s share price to a year low of $16.70 at the time of this writing.
But although shares could slide further, sophisticated investors are eyeing this drop as just a bump in the road, a little hiccup – an opportunity to BUY BACK IN.
You see, sometimes a company’s fundamentals take the back seat to negative and often TEMPORARY catalysts.
Aubrey McClendon’s scandal is temporarily driving share prices lower. Large natural gas stockpiles and low natural gas prices are temporarily adding fuel to the flame as well.
But keep in mind that CEOs often get replaced and scandals will blow over. Large stockpiles of natural gas will get depleted as companies scale back production. And natural gas prices will eventually rise because they have nowhere else to go but up.
Of course when prices rebound, Chesapeake’s $71 million loss could easily swing into a massive gain. And that could translate into a run up in share prices.
Let’s not forget, at its core… Chesapeake is rock solid.
Founded back in 1989, this conglomerate’s operations are focused on discovering and developing unconventional natural gas and oil fields onshore in the U.S. – the hotspot for energy today.
In fact, they are second only to Exxon Mobil for drilling natural gas in America!
Over the next few months, I predict we’re going to see a rebound in Chesapeake’s share price.
Stay tuned to see how this story unfolds.
for Top Stock Millionaire