Why SLB Stock Popped Today

SLB N.V. (SLB +5.62%) stock, the artist formerly known as Schlumberger, soared on Monday after Citigroup recommended buying SLB “on weakness” this morning, as StreetInsider.com reports.

SLB stock is up 6% as of 12:10 p.m. ET.

Image source: Getty Images.

Big trouble for big oil

We don’t have much detail on why Citi decided to recommend SLB, but I think we can guess.

Priced below $47 at Friday’s close, SLB stock was down 9% since before the Iran conflict began. SLB _had _fallen even further than that, and given how volatile oil prices have been lately, rising and falling on the latest headlines out of the Middle East, it makes sense to keep an eye out for weakness – and good times to buy oil stocks.

More than just that, though, consider this:

As _The Wall Street Journal _just reported, oil infrastructure in the Persian Gulf is getting beaten up by Iranian attacks this month. One of two production lines at Shell’s (SHEL 0.35%) Pearl gas-to-liquid plants – which cost $20 billion to build – has been “knocked out.” Damage to ExxonMobil’s (XOM +0.59%) natural gas facilities in Qatar could take five years to repair. Damage from a drone attack forced** Occidental Petroleum** (OXY 0.92%) to shut down operations at its Shah gas field in the U.A.E.

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NYSE: SLB

Slb

Today’s Change

(5.62%) $2.62

Current Price

$49.25

Key Data Points

Market Cap

$70B

Day’s Range

$47.08 - $49.85

52wk Range

$31.11 - $52.45

Volume

12M

Avg Vol

20M

Gross Margin

16.85%

Dividend Yield

2.47%

What it means for SLB stock

When oil and gas stop flowing, SLB suffers, too. Two weeks ago, the company lowered Q1 earnings guidance by $0.06 to $0.09. But here’s the thing:

This short-term pain for SLB stock could yield long-term gain, if oil companies and Mideast customers need to spend the next few years repairing the damage – and paying SLB to help. Priced below 20x earnings and with tremendous free cash flow, SLB could enjoy years of growth after this conflict finally ends.