The Russian economy remains heavily linked to the price of crude oil, and recent estimates state that gas prices will drop by 37% in Q1, 2016 owing to weakness in crude oil. The long-term effects of this on the stock price are clearly negative because it will drop prices to levels not seen since 2005. Gas prices for the Russian energy giant are slated to decrease to $180 per 1,000 m³. To put that into perspective, consider that the price for gas was $284 per 1,000 m³ in 2014. However, Europe is heavily reliant on Russia for its natural gas supply, and an estimated 30% of all European gas consumption is supplied by the Russian energy giant. In October 2015, Gazprom analysts averaged out European revenues for gas at $200 per 1000 m³, but that was based on an oil price of $50 per barrel. That we are now looking at oil prices in the region of $30 – $32 per barrel is an exceptionally important point to bear in mind. The below graphic reflects plunging stock prices since June 2012, with very little bullish momentum driving stock prices at any time with the exception of the latter half of 2014.

Gazprom is currently trading at a price of $3.36, with a 52-week trading range of $2.97 on the low end and $6.25 on the high end. The company has a market capitalization of $39.53 billion with a P/E ratio of 4.33 and an EPS of 0.78. The 1-year target price of the stock is $9.80 per share. Based on the current market conditions, Gazprom is surprisingly bullish. The reason for this is the low cost of the shares and the high earnings potential when commodity prices increase. The inevitable turnaround is going to happen when oil and gas prices start rising, and there is tremendous value to be gained from this investment. On a rating scale of 1.0 (strong buy) to 5.0 (strong sell), the mean recommendation for the stock this week is 2.0. This places the stock as a strong buy and the mean target price is $9.80 with a high target of $9.80 and a low target of $9.80.