I'll buy sometime Tuesday or Wednesday, I'll watch it closely. Here is my logic:
BP spent $1 billion so far. Figure another $4 billion until the well is capped. Figure $10 billion in cleanup and another $10 billion in lawsuits. So I peg $25 billion realistic worst case (which is in line with other economic worst case calculations).
Company lost $50 billion in market cap so far. I'd estimate $20 billion of that loss is due to decrease in oil prices -- so company already lost $30 billion in market cap related to spill.
If somehow this new effort works next week, then there is upside. If it doesn't, downside appears priced in. There might be a wave of panic selling Tues or Wed to drive the price significantly down.
We'll see, but I'd rather use some logic here. The company makes too much money.
u seem to forget about public perception as well ... nobody is going to buy there gas plus nobody is as smart as u to buy the stock so people re just going to sell the stock because there is better opportunity and less risk in other oilcompanyies y buy bp with just too many un knowns
most people don't see the value of BP, they just see the risk. I will not recommend anyone to buy BP unless they buy some protections. Buy out of money puts, Not selling call. Those who buy BP at $40's and sell calls got killed.
heres the problem with your logic, your mistaking market cap as actual value. Too many variable that yu did not list, it is not as simple as that too determine the value. Plus Obama's tail is on the line so yo can expect he will hang them out to dry to cover his butt. Wait till the dust settles and see whats left.
I'll also buy. Not now.....but soon. Here is my reason.
1.The stock price will declinne more, at what price XOM, CVX, TOT, Shell will want to buy? They are the real buyers, not small traders on the Yahoo board.
2. The dividends will be save for the next few quarters.
3. it will take years to deal with the cost of damages, BP will not be BK anytime soon.
4.What really have changed? Nothing, Top kill does not work, we all know, and Bp is not going to drop below $30 next week. it will take a long time.
So here is what I will do....
1. Already bought OCT $49, $45, $42 Put a months ago
2. Buy OCT $35 put last week
3. Plan to buy jan2011 $30 put next week and buy BP stock tuesday when the market open.
4. Buy more as the stock continued to decline as long as I'm protected.
In April I thought BP will drop till its 2009 low of $35. I amke enough of money on my puts to buy BP below $40 next week. I wishes BP will drop to $20's, Who ever going to take over BP will pay much more than that.
4500$ per leaking barrel.Minimum estimate before topkill was around 60 billion and max 365billion.
Could be more than 365billion now cause the topkill didnt work and than they didnt count the money derived from bp from lawsuits.What do you think it costs destroying a part of the world.
It sounds all reasonable, and more importantly, it sounds like you were already prepared to talk yourself into a trade.
Who knows, you may be right, but I would still be hesitant to jump in at the first micro rally on the screen. $35 puts were extremely active last week during the rally, and I've often found that to be a helpful indicator, fwiw.
In other words, if you want to risk a longterm position here, you might get even cheaper. Don't be in a hurry to lose money.
Once you do buy, you might consider buying some July or August puts as a hedge. I would strongly suggest that
The current $1 billion figure for current costs is BP's official statement and is a fact. If that was incorrect, there would be shareholder derivative suits. The other BP claims (i.e. 60 - 70% success for top kill) are conjecture. So we know that $1 billion was spent to date. That was over 1 month. This can last another 3 months until the well is killed. So just say $5 billion.
Clean-up costs, lawsuits -- another $20 billion? I'm satisfied to use that number. I'm looking for opening panic with some bottom fishers Tues morning. Once the price settles somewhere for a few hours, that is when I'll buy.
This is a catastrophe, but the company simply makes too much money and has a product people simply need. A $50 billion dollar haircut has already occurred. If it drops 3 points, that is another $10 billion. I'm satisfied with the downside risk for the LONGTERM potential. And I really emphasize longterm.
That market cap argument is bogus. Market cap is not a reliable measure of a future expected stream of earnings. Remember the internet bubble? There were MBAs with business plans with market caps of over a billion.
What you are not factoring in is a cut to the dividend which will have to happen, further regulations, sanctions, criminal proceedings, and a whole variety of crap we haven't even thought of.
I agree. If the estimate is $50B that means no earnings for BP for about 2 years - which means no dividend and no cap ex - which means they either borrow or issue more shares and dilute. Either way many smart investors will not stick around while this occurs and the price will continue to decline. I do believe it will eventually turn but the risk and costs and how they will be finance needs to be addressed which will be a drag on the stock until it is.
Their future expected stream of earnings is practically unchanged -- unless the government precludes them from US contracts. Do you really think all of a sudden we're not going to use oil anymore? I already pointed out that $20 billion of market cap was lost due to the 'expected' decrease of oil from the EU situation.
Agree this thing will hit low 30s or even 20s and there is way too much risk to make it a smart purchase at this point - buying now is too soon. I as well do not think it is going bankrupt but think as the costs escalate (and they will) and the dividend is cut (cannot pay expenses with market cap) it will get cheaper.