Ranger Energy Services, Inc. (NYSE:RNGR) 17% Stock Price Decline: Why Institutional Owners May Ignore It

Listen up, folks! We've got a situation here with Ranger Energy Services, Inc. (NYSE:RNGR). The stock has taken a 17% nosedive, and you might be thinking, "Should I jump in and buy the dip?" Well, let me tell you, the answer is a resounding NO! This is not the time to be a hero. Let me break it down for you.

First off, let's talk about the 1.2% one-year return on investment (ROI) for Ranger Energy Services, Inc. That's right, folks, a measly 1.2%! Compare that to the industry benchmarks and other energy sector investments, and you'll see that this company is lagging behind. The World Energy Outlook 2023 tells us that investments in fossil fuel supply see larger equity stakes, with fossil fuel companies having leverage ratios of 40% on average. This means these companies are in a position to reduce their debt levels and finance investments primarily through retained earnings, while returning cash to shareholders via generous buybacks and record dividends. Ranger Energy Services, Inc.? Not so much.



Now, let's talk about the key factors contributing to this 17% stock price decline. Geopolitical uncertainty and trade tensions are at an all-time high. The new Trump administration's plans for trade tariffs pose a serious threat to global economic growth in 2025. This uncertainty could knock 50 basis points off GDP growth, assuming partial retaliation by major trade partners. The impact on commodity demand would be negative, with global oil demand in 2025 potentially being 0.5 million barrels per day (b/d) lower, wiping out half a year’s growth. This geopolitical instability could lead to increased volatility in the energy sector, affecting the stock prices of companies like Ranger Energy Services, Inc.



But that's not all, folks! The energy transition and capital allocation are also playing a significant role. Investment in the supply of energy and natural resources is expected to reach record levels in 2025, with spend exceeding $1.5 trillion. However, the growth rate is half that of the early part of the decade due to capital discipline and caution on the pace of the energy transition. Low carbon’s share of investment (renewables, hydrogen, CCUS and critical metals for the transition) climbed sharply from 32% in 2015 to 50% in 2021 but has stalled since. To meet the goals of the Paris Agreement, low carbon spend will have to increase by 60% by 2030. This shift towards low carbon investments could impact the valuation of traditional energy companies, including Ranger Energy Services, Inc.

And let's not forget about the oil and gas market volatility. OPEC+ faces another testing year in 2025. The strategy to extend production cuts to protect oil prices could lead to an oversupplied market, putting downward pressure on oil prices. This volatility in the oil and gas market could negatively impact the stock prices of companies like Ranger Energy Services, Inc.

Finally, the increased focus on renewables is a game-changer. The demand for clean energy is outpacing supply, with renewables being buoyed by record public and private investment. Utility-scale solar and wind capacity additions were the largest across all primary generation sources, accounting for close to 90% of all new builds and expansions in the first nine months of 2024. This shift towards renewables could reduce the demand for traditional energy services, affecting the stock prices of companies like Ranger Energy Services, Inc.

So, what does all this mean for institutional owners? It means that you need to reconsider your investment strategies. You need to shift towards companies that are more aligned with the energy transition and low carbon investments. You need to factor in the increased volatility and uncertainty in the energy sector due to geopolitical tensions and trade wars.

In conclusion, folks, Ranger Energy Services, Inc. is a stock to avoid. The 1.2% one-year return on investment and the 17% stock price decline are red flags that you should not ignore. The energy sector is changing, and you need to be ready to adapt. So, stay away from Ranger Energy Services, Inc. and focus on the companies that are leading the way in the energy transition. Trust me, your portfolio will thank you!