Investors can make a logical, compelling case for Imperial Petroleum (NASDAQ:IMPP) stock. There is no doubt that oil tanker stocks have plenty of tailwinds in their favor. Oil prices have increased significantly as we are all well aware.
But there is inherent volatility in playing such a game. To be sure, investing in IMPP stock is simply a gamble: Russia’s invasion of Ukraine spiked prices and if Russia doesn’t pull back, the opportunity will continue. But at the same time, suggestions of a resolution could immediately send prices tumbling downward.
What to Make of It
Indecisiveness out of big banks and analyst firms simply reiterates that this is a guessing game. On the one hand, firms including Goldman Sachs (NYSE:GS) and Barclays (NYSE:BCS) have expressed concerns that oil prices could reach $200 per barrel. Energy consultancy Rystad Energy echoed the notion that oil could rise above $200.
If that scenario comes to pass Imperial Petroleum will be in a strong position. It will be able to charge more for transportation. That will spike and its top-line will rise, and that should result in rising share prices.
But even the moderate case looks attractive for Imperial Petroleum. That is reflected in Goldman Sachs raising its 2022 spot price to $135 from $98. The firm also raised its spot price for 2023 to $115 from $105.
Volatility is the price any Imperial Petroleum will pay. Nothing even has to happen to the supply of oil for IMPP stock to move rapidly. Any hope that the Russian invasion of Ukraine is nearing an end sends prices tumbling.
Case in point: March 14 news that investors were somewhat positive about diplomatic efforts between Ukraine and Russia sent oil dropping $7 per barrel.
That represented a 6% decrease while IMPP stock slid by 5% on the news. In other words, investors need to have a level of exceptional political insight in order to accurately gauge where Imperial Petroleum Prices are headed.
These news tidbits are received after the fact, though. Imperial Petroleum’s price increased more in the day prior to the White House imposing sanctions on Russian oil, liquefied natural gas and coal than they did on March 8, when the sanctions were released.
In short, there is a heavy element of guessing at play when investing in this stock. The company’s financial results weren’t eye-catching by any means. But at the same time, the company is making a heavy push toward capitalizing on current trends.
Imperial Petroleum did worse in 2021 than it did in 2020. But it wasn’t terribly worse. The company lost $2.157 million through the first nine months of 2021. That was a significant increase over the $553k loss in the same period in 2020.
But it probably won’t matter if the company’s plans take root.
The company publicly offered 9.6 million shares at $1.25 on Feb. 22. That sale resulted in $12 million net proceeds to the company. The sale was expressly intended for the purchase of more vessels.
And Imperial Petroleum did just that, acquiring two tankers on March 8. That brings its fleet size to six.
What to Do
Investors should clearly realize that judging IMPP stock isn’t an easy task. That’s true of any stock, but especially so in a smaller company like Imperial Petroleum caught in a multi-faceted situation.
For me personally, IMPP stock is a pass. I don’t have the requisite risk tolerance to invest much in it. For others that is completely different. One factor in favor of investing is simply that Imperial Petroleum is making moves. Sometimes that matters as much as anything else. For risk-tolerant investors, I see a strong argument in favor of investing.
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On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.