August 1, 2020
Introduction
I am nervous as a beginner investor. I just put $45,000 Canadian dollars in the market, since I made a mistake less than two weeks ago and sold 2000 shares of HSE.TO because of panic, I like to go over the same process again and relearn the lesson.
One article helps panic mind to think ....
The demand hasn’t reached its full capacity yet, and it might slump again if another wave of the pandemic hits. And that’s just one of the reasons why Suncor is continuing with its limited production capacity. The company produced about 18.5% less oil per day in the second quarter of 2020 than it did in the second quarter last year.
The CEO expects prices to remain volatile, though not as much as they were in the second quarter. Still, the company will not take the decision of reopening its second train in its Fort Hills facility if the demand stays steady or grows. But he also listed factors (including a second wave of the pandemic) that might instigate another bout of low demand.
Suncor’s stock
The company is currently trading at $21.5 per share at writing. It’s about half the pre-pandemic highest. The company is also facing seven environmental charges, and the company recently posted a loss of $614 million for its second quarter.
That’s a massive sink from the $2.7 billion profit in the same quarter last year. This beloved Dividend Aristocrat also had to slash its dividend down to 50% of its previous year’s dividends.
The energy sector is suffering, and Suncor is suffering a bit more than many other companies in the energy sector. If the company has to keep operating at low capacity and demand doesn’t surge for a few more months, we might see one or two more quarters of loss.
Foolish takeaway
At its current valuation, Suncor might look very attractive to some investors. Even after slashing its dividends down to halves, the yield is at 3.9%. The stock is trading at a price to books of 0.9 and a trailing price to earnings of 12 times.
While the balance sheet is strong, the prospects appear dark. But Buffett hasn’t bailed on the company yet, and that might be a good sign.
The post Suncor (TSX:SU) CEO Has This Warning to Share appeared first on The Motley Fool Canada.
Facts to review:
- Suncor produced about 18.5% less oil per day in the second quarter of 2020 than it did in the second quarter last year.
- Suncor will not take the decision of reopening its second train in its Fort Hills facility if the demand stays steady or grows.
- Buffett hasn’t bailed on the company yet, and that might be a good sign.
- If the company has to keep operating at low capacity and demand doesn’t surge for a few more months, we might see one or two more quarters of loss.
- The company is currently trading at $21.5 per share at writing. It’s about half the pre-pandemic highest. The company is also facing seven environmental charges, and the company recently posted a loss of $614 million for its second quarter.
Actionable Items
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