Buy Smart Sand (NSDQ: SND)

By Linda McDonough • March 29, 2017

Buy Smart Sand (NSDQ: SND)

Buy Up To:$17

Target: $22

Smart Sand Inc., a November 2016 IPO, makes high-quality Northern White raw frac sand. Demand for this sand, a critical ingredient used in hydraulic fracking, has been surging. Prices for fracking sand are almost double what they were in the latter part of 2016.

Industry experts Spear & Associates estimate that demand for fracking sand will increase 29% in 2017 and another 20% in 2018. Any price increases would be layered on top of this volume burst.

The decline in oil prices has forced oil and gas developers to justify the expense of new wells. Costly offshore drilling platforms and deep vertical wells are simply too expensive with oil bouncing around $50. This has led most producers to employ fracking more frequently and in larger wells.

In fracking, sand is mixed with water and chemicals and then blasted at high pressure into wells. The propellant breaks open fissures in the rocks, releasing oil and gas that would not have been accessible otherwise.

A shift to larger horizontal wells, which require significantly more sand to release oil and gas, is increasing the amount of sand required per well. Due to its shape, strength and chemical properties, the Northern White sand produced by Smart Sand is one of the most efficient types of fracking sand.

Smart Sand, which came public in November at $11, is one of the few fracking companies to remain profitable during the oil wipe out in 2014 and 2015. Current estimates look for flat earnings in 2017 and then a 240% jump in 2018.

My target conservatively uses a Price to Earnings (P/E) multiple of 20 on 2018 estimates for a target of $22. As Smart Sand proves itself over the next few quarters that target may increase.

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LittleBitey

03/29/17 ‐ 11:52am ET March 29, 2017 at 11:52am ET

In at $15.77 on TD Ameritrade. Thanks Linda

James - Maryland

03/30/17 ‐ 7:37am ET March 30, 2017 at 7:37am ET

If I recall, until recently the open trades table included a number of footnotes, including one stating that the entry price was the close price on the day you recommended the stock. That’s certainly not the case for the SND transaction. Did I miss a communication on this change in calculating ROI?

Linda McDonough

03/30/17 ‐ 7:19pm ET March 30, 2017 at 7:19pm ET

James,
I’m looking into this. You are correct- the entry price has been marked at the closing price on the first day. I have a note into the people that maintain the data base- I’ll let you know what I find out.
Best.
Linda

Aaron Cavender

04/13/17 ‐ 10:47pm ET April 13, 2017 at 10:47pm ET

Linda,

Do you have any insight as to why Smart Sand took a sizable drop today? I did not find any news on my brokerage’s news service to explain what caused the sell off.

Thanks,
-Aaron

Linda McDonough

04/17/17 ‐ 8:51am ET April 17, 2017 at 8:51am ET

Aaron,
I am scratching my head. I’ve checked all the sources I know of and can’t find any specific news. The entire group was weak, likely due to the drop in oil, but SND was weaker than others. I’ll keep you posted if I find other news but am still very bullish on the name.
Best,
Linda

Chris Wulf

04/17/17 ‐ 4:09pm ET April 17, 2017 at 4:09pm ET

I’m hearing that low revenues are related to extra costs to open reopen closed sites on order to accommodate an increase in demand.
I’m taking the opportunity to double down.

Linda McDonough

04/18/17 ‐ 9:37am ET April 18, 2017 at 9:37am ET

Chris,
Thanks for the information. Where are you hearing this? Is there a news story?
Best,
Linda

Chris Wulf

04/18/17 ‐ 11:09am ET April 18, 2017 at 11:09am ET

I’ve called investor relations. They’ve confirmed expation of the main facility to increase production by approx 1.1 million tons. A secondary facility is also planned for expansion. Both to complete about the end of 2017.

Linda McDonough

04/18/17 ‐ 12:11pm ET April 18, 2017 at 12:11pm ET

Nice work Chris! I appreciate the information.
Best,
Linda

Johan Jones

04/14/17 ‐ 3:22am ET April 14, 2017 at 3:22am ET

Hi Linda,

Do you have any insight on ICHR? The price has dropped significantly this week.

Thank you.

Johan

Linda McDonough

04/17/17 ‐ 9:00am ET April 17, 2017 at 9:00am ET

Johan,
ICHR filed a secondary offering last week. Insiders will sell $100 million of stock, roughly 6 million shares based on current prices. The selling shareholders are not listed in the primary offering agreement but it is likely Francisco Partners, who owns 73% of the shares outstanding. I do not consider this a negative sign. Large holders like this often peel off shares in the 12-24 months after an IPO. In a perverse way, it’s quite bullish as a company would not want to open itself up to lawsuits if it allowed a big secondary before a bad quarter.
Best,
Linda

Paul Dash

04/14/17 ‐ 8:28pm ET April 14, 2017 at 8:28pm ET

What happened to Apogee?? They got absolutely crushed after they beat earnings and revenue and seemed to give optimistic guidance in the conference call.

Linda McDonough

04/17/17 ‐ 9:04am ET April 17, 2017 at 9:04am ET

Paul,
APOG’s backlog for its Architectural division did not increase as management had predicted in the prior quarter. I sold this out of this mid-January as the backlog had been soft for a few quarters. I’m not following it super closely but did see that Craig-Hallum thinks the stock was oversold based on “misplaced concerns” over the construction cycle.
Best,
Linda

Diego Arevalo

06/07/17 ‐ 4:51pm ET June 7, 2017 at 4:51pm ET

What is happening to $SND? Getting Low’s every day now!

Linda McDonough

06/09/17 ‐ 6:34am ET June 9, 2017 at 6:34am ET

Hi Diego,
I know, it’s been incredibly frustrating. Every morning the news is that oil drops again. I really do believe in the company and am trying to chase down if there is a specific fundamental reason (outside of being dragged down with oil) causing the weakness. To date, I’ve found nothing so am holding on to the stock.
Best,
Linda

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