On fears that the coronavirus is continuing to spread throughout the country, the stock market plunged more than 2.5% yesterday.
As the economy continues to face challenges, this trend could continue throughout the summer. And if the stock market heads lower, there are a number of companies that could be at risk of bankruptcy in 2020…
Using the POWR Ratings system, we have determined that Chesapeake Energy Corp. (CHK), California Resources (CRC) and Ascena Retail Group (ASNA) are “Strong Sells” and their survival could be at stake.
Due to the plunge in oil prices that occurred at the beginning of 2020, American shale companies have been facing significant headwinds. Many of the US shale producers have a large amount of debt on their balance sheets and with oil prices under $40, they are unable to generate any real profits.
CHK failed to make nearly $14 million of debt interest payments earlier this month and hundreds of millions of dollars in pending debt maturities. Many expect the company could default in mid-July.
The POWR ratings have CHK ranked 72nd of 96 stocks with an F Trade Grade, a F Buy & Hold Grade and negative price returns across the past half-decade but for 2016. In fact, CHK has a negative price return around -100% across nearly every period of time but for the past three months. Take a look at the average analyst price target for CHK and you will find it is a mere $5.33, meaning there is more than 50% downside.
It wasn’t long ago when oil and gas companies were profiting handsomely. Times have clearly changed as the price of oil remains under $40.
CRC, a Los Angeles-based company, is a POWR Ratings dud with F Trade and Buy & Hold Grades, a D Peer Grade and an Energy – Oil & Gas industry rank of 75 out of 96 stocks.
CRC’s price returns are in the red across the board. In fact, CRC’s six-month price return is -84% and its one-year price return is -92%. CRC has been on the decline since October of 2018 when priced at $50.
All in all, CRC has $5 billion of debt, less than $20 million in cash and a boatload of unhappy shareholders. It is quite possible CRC will declare bankruptcy as early as this summer.
The Ascena Retail Group is an apparel chain store that provides specialty apparel and accessories for women and girls. Unfortunately for ASNA, more
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