Why Shares of Chart Industries Plummeted This Week – The Motley Fool

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What happened

While the S&P 500 dipped 1% lower this week, shares of Chart Industries (GTLS 3.09%) fared much worse. As of the market’s close today, shares of Chart Industries, a manufacturer of equipment used in energy and industrial gas applications, fell 9.4% since last Friday’s trading session, according to data provided by S&P Global Market Intelligence.

Evidently, the company’s acquisition of Howden and the bearish opinions echoing on Wall Street this week regarding the stock spooked investors, causing the sell-off.

So what

A little over a week ago, Chart announced its $4.4 billion acquisition of Howden, and investors didn’t respond well. The stock dropped steeply on the day of the announcement as investors fretted about the steep price tag and the prospect of shareholder dilution resulting from the deal. Investors continue to wrestle with the acquisition; Chart’s stock has fallen more than 18% since the day of the announcement.

Throughout the week, several analysts revealed their pessimism regarding Chart’s stock. On Monday, Wells Fargo downgraded the stock to equal weight from overweight and slashed the price target to $148 from $248. Two days later, Jefferies cut its price target to $205 from $250, and today Piper Sandler downgraded the stock to neutral from overweight, dropping the price target to $133 from $228.

Now what

It was a difficult week for Chart’s investors, but the industrials stock’s drop this week isn’t a reflection of anything catastrophic for the company. In fact, the acquisition of Howden should contribute significantly to Chart’s financials in the long term. But with shares trading at 72 times operating cash flow, investors may want the stock to fall further before considering a position.

Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chart Industries and Jefferies Financial Group Inc. The Motley Fool has a disclosure policy.

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