Memorial Resource Development Corp (NASDAQ:MRD) is a comparatively new stock in the exchange, listed for not a full year yet but already close to retest its lifetime low. The quarterly result reported by the company disappointed the market and as a result, the stock lost over 14% in a single session, after hitting a low 22% lower from the previous day’s closing price. The stock has been downgraded by Stifel Nicolaus to “hold” from the earlier “buy” rating.
Sometimes the actual result doesn’t count nearly as much as the expectation of the street and this can be called as an example of that. The revenue grew by 73% on a y-o-y basis to $103.8 million but that figure was a lot lower than the expected $123.7 million. Net income of $0.86 per share could look good if it was not based mainly on gains on hedging. The same figure, adjusted for one time earnings, comes down to $0.01, much below the expected figure of $0.13.
With the oil price, or even natural gas, at the lower levels and no hope of any immediate vertical recovery on that front, the plan of the company to expand production by investing $500 million in 2015 looks a bit risky. Only a sharp bounce back in the commodity price can push the company towards actual profitability.
Technically, the charts do not show any encouraging signs yet. The last rise from the bottom of $15.50 was highly overlapping and contained in a perfect channel, all signs of a corrective rally. The breakdown of that channel marks a Bearish Flag pattern and if the pattern implication materializes into reality, then the initial target would be $15.
The bulls would hope for the $15.00-50 area to hold. The volume pattern doesn’t give them much hope though as the last volume spike was followed by a steep fall. Investors may wait and keep an eye on it.