Saipem stock forecast: Is now the time to pick up SPM shares at a bargain?
Italian energy services company Saipem (SPM) saw its share price plunge by 48.6% on 12 July after investors declined to fully subscribe to the company’s €2bn cash call, raising concerns about confidence in its turnaround plan.
Saipem issued an unexpected profit warning in January and has since been attempting to stabilise the company. Ratings agency Moody's Investors Service downgraded Saipem’s corporate bond rating and its probability of default rating in February after the company issued a profit warning.
The agency stated:
Does the share price drop present an opportunity to pick up shares at a discount ahead of a recovery, or should you short the stock to profit from further losses on concerns about the future viability of the business? What do some of the latest Saipem stock forecast indications show?
In this article, we look at the company’s recent woes and the outlook for the SPM stock price.
Saipem’s energy services business hit by pandemic supply chain impact
Based in Milan, Italy, Saipem was formed in 1957 as part of Enrico Mattei’s reorganisation of the Italian oil industry. The public administrator formed Eni from Azienda Generale Italiana Petrolio (AGIP), the General Italian Oil Company. Mattei initially focused on using natural gas resources to support the development of a national industry in Northern Italy as the country recovered from the Second World War.
Snam was formed as Eni’s gas pipeline subsidiary company. In 1955, Snam Montaggi was created to assemble pipelines and drilling platforms. In 1956, Snamprogetti was formed to specialise in oil and gas tankers. In 1957, Eni’s subsidiary drilling contractor Saip, merged with Snam Montaggi to create Saipem.
Saipem became a leader in offshore drilling and pipeline construction in Europe and beyond, initiating the Central European Line pipeline between Italy and West Germany, and building oil and gas pipelines in India and Iran. Saipem was primarily a supplier of oilfield services to Eni.
The company operates business segments specialising in offshore engineering and construction, offshore drilling, onshore engineering and construction and onshore drilling.
Saipem was listed on the Milan-based Borsa Italiana stock exchange in 1984 but remained closely tied to Eni until 2016, when Eni sold a 12.5% stake in the company to Italian sovereign wealth fund CDP Equity, which was then known as Fondo Strategico Italiano. Eni still holds a 30% stake in Saipem.
Saipem rebranded following the stake sale, replacing the Eni logo and focusing on becoming a more autonomous oilfield services provider. In 2017, Saipem launched its Xsight division, focusing on high-value services. In 2019, Xsight led the company’s move into the floating offshore wind energy sector.
Saipem reported a loss in its adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA) of more than €1.1bn for 2021, equivalent to “more than one third of the company’s equity”, because of a “significant deterioration of the full life margins of some projects related to E&C Onshore and Offshore wind, due to the persistence of the pandemic and the current and prospective increase of the costs of raw materials and logistics.”
Saipem share price plunges in 2022
Saipem carried out a reverse stock split in May 2022, at a ratio of 21 new shares issued for every 100 outstanding shares, after its profit warning for 2021 eroded the stock’s value.
Saipem’s stock has shown negative returns in the decades since its initial public offering (IPO). The stock started trading in 1987 at a split-adjusted equivalent of €6.85 per share and remained below €10 until 1996. The stock then began to trend higher over the following decade, reaching €96.82 in November 2007 during the commodity boom that preceded the 2008 global financial crisis. The share price plummeted to €32.02 in November 2008 but then recovered to reach new highs above €100 in 2011 and 2012 as commodity markets rebounded.
Saipem stock traded up to a high of €123.25 in August 2012. But the share price subsequently dropped back, falling to €43.56 in July 2013 and continuing to decline to €8.64 in April 2016 as plunging oil prices cut demand for a share issue the company launched to restructure its finances.
Saipem saw a massive €14bn wiped off its balance sheet over a three-year period, as it was subject to a corruption investigation in Algeria, issued two profit warnings and faced a bearish market outlook.
Saipem’s share price moved up to €13.32 in September 2018, but was trading back at the €8 level by the end of the year and was unable to sustain another run above €10 in 2019. The share price plunged again in March 2020 at the start of Covid-19 lockdowns, dropping to €5 as investors anticipated a decline in oil and gas demand and disruptions to industrial activity. The stock traded down to €3.42 in September 2020, then attempted another rebound as the prospects for the oil and gas market improved with the introduction of Covid-19 vaccines and the easing of lockdowns. The Saipem share price moved up to €5.82 in February 2021, but soon resumed its decline.
The stock ended 2021 at €4.63 and dropped back from €4.86 to €3.39 on 31 January when the company announced its profit warning. By early March, it was trading at just €2.31.
The SPM stock price hit an all-time low of €1.25 on 24 June, after the company announced its €2bn rights issue from 27 June until 11 July at a price of €1.013 and warned that:
New share issues are viewed as bearish by investors as although they raise money for the company, they increase the overall share count and dilute the value of each share.
Saipem’s share price plunged by 48.5% on 12 July to €1.95 after the company said that only 70% of the new stock issued was subscribed for €1.4bn, reflecting a lack of investor confidence. Eni and CDP subscribed all the new shares to which they were entitled based on their shareholdings in the company, covering 44% of the capital increase, Saipem said in its statement.
Several banks, including BNP Paribas (BNP), Citigroup (C), Deutsche Bank (DB), HSBC (HSBA), Intesa Sanpaolo (ISP) and UniCredit (UCG) agreed on 21 June that they would take on any unsubscribed shares to cover the full €2bn capital increase. The unexercised rights will be offered on the stock exchange until 14 July.
In its new 2022-2025 strategy announced in March, Saipem said that it will focus on its “offshore E&C and offshore drilling segments, with 2021-25 CAGR of Group revenues expected at around 15%” and introduce “an accelerated efficiency plan with reduction of structural costs of more than €150 million in 2022 and a run-rate of more than €300 million in 2024”.
In June, Saipem sold its onshore drilling business to drilling, engineering and technology company KCA Deutag for $550m in cash plus a 10% equity stake and sold the FPSO Cidade de Vitoria, an offshore vessel in Brazil operated for Petrobras, to BW Energy for $73m in line with the strategic plan.
The strategy is being implemented by a new management team the company appointed in February, with a new organisational structure including “the set-up of a new General Manager function with broad operative and managerial responsibilities” and “the creation of a specific unit focused on reinforcing the activity of financial planning and control of the projects and of the other company’s operations.”
What is the outlook for the Saipem share price given the current turmoil? What do some of the latest Saipem stock predictions show?
Saipem stock forecast: the latest predictions
At the time of writing, technical analysis by StockInvest.us showed an upward trend in its short-term Saipem stock forecast, with the bottom of the range rising to €10.13 by 25 August.
However, based on global macro models projections and analysts’ expectations compiled by Trading Economics, the data provider’s SPM stock forecast estimated that Saipem’s stock could be priced at €3.46 by the end of the current quarter. The price could then slip lower to €3.07 in one year, suggesting a limited rebound from the €1.95 level.
Stock forecasting service Wallet Investor expected the stock to remain highly volatile in its Saipem stock forecast for 2022 and beyond. The website’s algorithm at the time of writing showed the stock trading up to €4.679 in August, down to €3.841 in September and €3.555 in October before rising to €8.332 in November and then retreating to €6.162 in December. In 2023, the share price could range between a low of €0.173 and a high of €11.875. Wallet Investor’s Saipem stock forecast for 2025 had the price ranging between €0.059 and €11.159.
Among 16 analysts that have issued an SPM stock forecast, there was one overweight rating, seven hold recommendations, four underweight ratings and four sell recommendations, according to data compiled by the Wall Street Journal.
When researching a Saipem share price forecast, it’s important to keep in mind that the stock’s extreme volatility makes it difficult for analysts and algorithm-based forecasters to come up with accurate predictions. We recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns.
FAQs
Is Saipem a good stock to buy?
The Saipem share price is highly volatile, creating opportunities for high returns but also a high risk of losses. Whether the stock is a suitable investment for you depends on your risk tolerance and how much you intend to invest, among other factors. Keep in mind that past performance is no guarantee of future returns. And never invest money that you cannot afford to lose.
Will Saipem stock go up or down?
The direction of the Saipem share price could depend on how successful the company is in implementing its turnaround strategy. Its performance could also depend on the direction of the oil and gas markets as well as the impact on ongoing challenges in supply chain logistics, among other factors.
When looking for a Saipem stock forecast, it’s important to keep in mind that the market remains extremely volatile, making it difficult to accurately predict what the share price will be in a few hours, and even harder to give long-term estimates. As such, analysts and online forecasters can and do get their predictions wrong.
Keep in mind that past performance is no guarantee of future returns. Always do your own research. And never invest what you cannot afford to lose.
Should I invest in Saipem stock?
You should do your own research to decide whether Saipem is an appropriate investment for your portfolio based on your personal circumstances.
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