Thursday's Rally: Has Petrohawk Gotten Too Far Ahead of Itself?

Clearing its previous high for the year, Petrohawk Energy (HK) ran up 11.35% Thursday to close at $34.82. This Houston-based developer, producer, and distributor of oil and natural gas jumped on an upgrade by Lehman Brothers.

Trading over 2.5 times its normal volume, Petrohawk is a good company that couldn’t have had a better day yesterday, a pre-market upgrade on a day when crude oil recovered 5% from a recent decline with the overall market moving 1.75% higher. I like the company but would wait for a 2 dollar pullback before stepping in. If you could predict a similar period where both the market and oil rally, this stock would be a very nice vehicle to ride that movement.

The company has 30% earnings growth expected for the current quarter and roughly the same for next quarter. Sales growth of 21.7% estimated for the quarter ending in September 2008. The stocks current price/earnings ratio, 366.53, shows just how ahead of itself it is. Its forward P/E is a more reasonable 31.37. The stock has moved 121% over the past 52 weeks while the S&P 500 has declined 6% in the same time frame.

Another bullish sign in addition to the price action of the stock is the strong volume of the July Calls. Investors traded the 30, 35 and 40 July strike prices at well above normal levels yesterday, anticipating a move higher within the next 6 weeks.

Comments

[Eric Fox:]

Putting aside momentum for a moment...do you believe that the assets that HK has are worth 2.5 times what they were worth in February?

2008 Jun 06 09:56 AM

[Shaggieman:]

THIS STOCK IS MOVING ON ANTICIPATION OF A $40 BUY OUT. Sorry, I had my caps button on by mistake!

2008 Jun 07 11:12 AM

[goldenhinde:]

Something is up. There was massive insider buying by Board members this week. Check out there SEC form 4 filings. When one insider buys it doesn't mean much. When half a dozen put six figures of after tax money into the stock - one ought to pay attention.

2008 Jun 07 06:17 PM

[Eric Fox:]

No one has answered my question yet.

2008 Jun 09 12:45 PM

[Eric Fox:]

OK...I'll answer my own question. They are not.

2008 Jun 10 04:46 PM

[Captain Thomas:]

The Hawk has 275,000 ac in Haynesville, 6000+ drill sites. HK will drill 40 good wells a month for 5 years. The first well will make $35,000,000 a year. The flow line will not be connected until December so there is no income from the wells.

2008 Oct 21 01:15 PM