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Short Selling Target and Short Selling Analysis :CARBO Ceramics Inc.  (NYSE:CRR) toward $ 25 

 

Wall Street analysts have placed a target price of $28.833 for Carbo Ceramics, Inc. (NYSE:CRR). This number is based on the mean consensus estimate from the 6 research firms that recently issued reports on the stock. 

 

Because of the fact that its now targeted by leading short sellers , the stock's price may go down to $ 25 .

 

Extremely negative news ahead for CARBO Ceramics Inc:

 

Management is forecasting Q1 revenues to be down more than 50%.

 

Exxon has shifted to all-sand completions in the Bakken.

 

Carbo loses two major customers as a result of M&A.

 

QEP, Oasis, WPX and Halcon move toward all-sand completions.

 

Baker Hughes/Halliburton transaction could result in the loss of a major Carbo distributor.

 

CARBO has been hit by the perfect storm. A market trend away from ceramic proppants and a downward spiral in oil drove the price down 75%.

 

FracFocus data reveals some troubling trends for the ceramics industry and for Carbo. Last year, significant investor attention was placed on Carbo when major customer Rosetta Resources (NASDAQ:ROSE) switched to all-sand completions in the Eagle Ford. A review of the FracFocus database indicates further customer losses for the ceramics industry and Carbo.

 

The worry of the market seems to have been not so much that there is some viable business competition in the manufacture of ceramic proppants (indeed, CRR has developed a reasonable moat), but that ceramic proppants themselves may become obsolete owing to their price, and to recent trends in hydrofracking.

 

Carbo has some major customers that remain loyal to its ceramic proppants. However, these customers are increasingly concentrated, and any further attrition from these remaining customers would significantly impact the company.

 

The current negative catalysts: (1) Ceramic proppant sales that are below expectations. (2) Reductions to consensus EPS, which are currently 38% above our 2015 EPS estimates. (3) Additional E&P commentary about increased sand usage in completion jobs.

 

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