Advertisement
UK markets open in 2 hours 12 minutes

  • NIKKEI 225

    38,349.75
    +797.59 (+2.12%)
     

  • HANG SENG

    17,110.21
    +281.28 (+1.67%)
     

  • CRUDE OIL

    83.45
    +0.09 (+0.11%)
     

  • GOLD FUTURES

    2,341.80
    -0.30 (-0.01%)
     

  • DOW

    38,503.69
    +263.71 (+0.69%)
     

  • Bitcoin GBP

    53,674.35
    +356.46 (+0.67%)
     

  • CMC Crypto 200

    1,436.85
    +22.09 (+1.56%)
     

  • NASDAQ Composite

    15,696.64
    +245.33 (+1.59%)
     

  • UK FTSE All Share

    4,378.75
    +16.15 (+0.37%)
     
Money:

What is the true cost of the UK state pension?

To get a sense of the true value of the state pension, you can look at how much you would need to save to match it yourself

Why RigNet Stock Is Tumbling Today

Matthew DiLallo, The Motley Fool
Updated

What happened

Shares of RigNet (NASDAQ: RNET) plunged about 10% by 2:30 p.m. EDT on Friday. The remote communications company didn't have any news-driven catalysts to spark the downdraft. Instead, it got caught up in a broader sell-off as both the stock and oil markets fell by more than 1% on the day due to renewed concerns of a global economic slowdown.

So what

Today isn't the first time shares of RigNet have made a big move without a direct catalyst. Because the company focuses on providing remote communications and other services to companies operating in the offshore oil market, its stock tends to be highly correlated to changes in oil prices. Crude prices had been red-hot this year after rallying more than 20% over the past couple of months, which sent shares of RigNet up double-digits at one point. However, with crude selling off today -- diving about 2% on renewed fears that oil demand might weaken as a result of a slowing global economy -- it caused shares of RigNet to plunge.

Barrels of oil rising in height with an upward pointing red arrow in the background
Barrels of oil rising in height with an upward pointing red arrow in the background

Image source: Getty Images.

ADVERTISEMENT

RigNet's stock is so sensitive to changes in the price of crude oil partly because of its small size and weaker financial profile. The company has lost money over the last several years due to the continued troubles in the offshore drilling market, which still hasn't recovered from the oil market downturn that started in mid-2014. Making matters worse, the company lost a key ruling from an arbitration panel last year, which could force it to make a big payment to a supplier. While the company is working to reduce the final award, that uncertain outcome makes the company's stock even more volatile when markets fall.

Now what

RigNet sees its financial results improving in the back half of this year due to its belief that the offshore oil market will begin bouncing back. However, the road to recovery will likely continue to be bumpy, which is why investors should expect this stock to remain highly volatile, especially when there's a sell-off in the market like today's.

More From The Motley Fool

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends RigNet. The Motley Fool has a disclosure policy.