. Buying a stock on the way down hoping it rebounds in a couple of years is not a wise move.
"Although this spill is astronomical, we have to remember that big oil companies like BP could still make astronomical profits and it has a lot of attractive assets it can sell to make money," said Phil Flynn, senior market analyst at PFG Best. "I'm still confident that BP will avoid default."
Still, Flynn conceded that there is cause for investor confidence to erode, given the unknown potential for political backlash, and even hurricane forecasts, which could hamstring cleanup efforts.
Whether BP's stock continues to decline or rebounds hinges on the successful completion of the relief wells, says Pavel Molchanov, an analyst at Raymond James, a solution that BP estimates could take another three to four weeks. Until then, Molchanov says, there aren't a lot of reasons to buy the stock.
This could further punish the company's market capitalization, which has fallen to $85 billion, from more than $160 billion since the oil rig explosion in April, leaving BP quite vulnerable.
"BP's market cap is eroding and its ability to finance itself in the capital markets is impaired," said Orr. "It's anybody's guess what can happen, but the fear of the market is that the liability could be so enormous that BP may have to seek bankruptcy protection."
