Cobalt International Energy Inc.'s shares jumped Tuesday after a Deutsche Bank analyst issued a positive assessment of the oil company's potential.
THE SPARK: Deutsche Bank analyst Ryan Todd said that lofty expectations, a complex quarter and conservative comments by management during Cobalt's last earnings report sparked a recent sell-off of the company's shares. But the analyst said the market may be overlooking some of the finer points of the period and the company's long-term growth potential. He reiterated a buy rating on the stock.
THE BIG PICTURE: Cobalt, based in Houston, drills for oil and natural gas in deep areas of the Gulf and off the coast of the African nations of Angola and Gabon.
THE ANALYSIS: Todd said that investor expectations were too high for one of the company's drilling areas off the coast of Angola. So when Cobalt recently revealed more data that proved more conservative, investors struggled to adjust.
The analyst said that there is still significant opportunity for the area. Additionally, the company's long-term portfolio is still poised for growth.
Todd said that it is still the stock to own in 2013 and reiterated a buy rating on its shares. He lowered his target price on the company's shares from $39 to $37 to reflect the reduced value of the drilling basin at this time.
SHARE ACTION: Cobalt's shares jumped 13 percent by afternoon trading Tuesday to $23.51. They have lost about 26 percent over the past six months but are still up 51 percent for 2012.