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Tellurian stock price has become cheap: Is this a value trap?

By: Invezz

Tellurian (NASDAQ: TELL) stock price has been in a freefall this year as the price of natural gas plunged. The shares have also collapsed to a record low of $0.51 after the company published weak financial results and delivered a going concern warning. It has crashed by over 75% from the highest point this year.

Bankruptcy risks remain

Tellurian is a company in the energy industry. It is a leading player in the Liquified Natural Gas (LNG) industry, which has become popular after Russia’s invasion of Ukraine. Tellurian’s core project is known as Driftwood LNG, which is located in Louisiana. It aims to use the facility to ship US LNG to countries, especially in Europe.

Tellurian stock price has been in a freefall this year as the price of natural gas has collapsed. Data by TradingView shows that natural gas was trading at $3.50 on Tuesday, about 66% below the highest level in 2022. It has made some improvements recently, rising by over 60% from its lowest point this year.

Watch here:

Tellurian published weak financial results recently. Its net production jumped to 19.5 Bcf in the last quarter, up from 11.4 Bcf in the third quarter of 2022. The average realized price dropped from $7.07/Mcf to $2.22/Mcf.

As a result, the total revenue dropped from over $81.1 million to over $43.2 million. It also moved from a profit of $40.1 million to a $12.6 million loss while the adjusted EBITDA plunged to $18.3 million. 

Tellurian is in trouble as high interest rates makes it business more expensive to operate. Its balance sheet is not doing so well as the total cash has dropped from $608.7 million in Q2’22 to $59.3 million in Q2’23. It has over $372 million in long-term debt.

Therefore, Tellurian warned that its cash balance could be insufficient to fund its operations in the next 12 months. The statement said:

“These conditions raise substantial doubt about the company’s ability to continue as a going concern within one year after the date that the financial statements are issued.”

Tellurian is working to solve this challenge by talking with investors who will take an equity stake in the company. It is also discussing LNG offtake plans to boost its balance sheet. 

Tellurian stock price forecastTellurian stock

TELL chart by TradingView

The daily chart shows that the TELL stock price has been in a freefall in the past few months. It crossed the important support level at $0.9375, the lowest level on March 24th. The shares have dropped below all moving averages while the Relative Strength Index (RSI) has moved below the oversold level.

Therefore, I suspect that the Tellurian share price will continue falling in the coming months as bankruptcy risks rise. If this happens, the shares will likely drop to the next key support at $0.25. There is also a likelihood that Tellurian stock price will improve if it reaches a financing deal in the next few months.

However, as we have seen with WeWork, it is always risky to invest in a company that has issued a going concern warning especially in the current high-interest rate environment.

The post Tellurian stock price has become cheap: Is this a value trap? appeared first on Invezz

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