By Ian Salisbury

Low oil prices have slammed energy stocks across the board. But investors might have been too hasty to bet against Atlas Energy Solutions, one of the sector's hardest-hit stocks.

The energy industry had high hopes for the Trump administration, after the president made slogans like "Drill Baby Drill" part of his reelection campaign. Things haven't gone quite to plan -- thanks in part to the Organization of Petroleum Exporting Countries, which agreed to boost production this spring, helping keep oil around $60 a barrel since early April.

In response, the Energy Select Sector SPDR, an exchange-traded fund that tracks the sector, has slumped about 12% in the past year, compared with the S&P 500's gain of about 12%.

Investors expect the pain to continue, according to a report this week from investment bank Stephens. The firm looked at short interest -- a measure of how many investors are betting against a stock or slice of the market -- across the Russell 1000.

Among large-cap sectors, energy had the highest share of short interest at 2.6%, compared with 2.5% for real estate and 2.3% for basic materials. In general, short interest reflects the percentage of a company's outstanding shares that investors have currently borrowed, then resold, hoping the stock's price will fall -- allowing them to repurchase it later at a lower price.

Stephens also looked at individual companies that showed the highest short interest, among those its analysts cover. The top three: Atlas Energy Solutions, with 23% short interest; real estate firm eXp World Holdings, also at 23%; and CNX Resources, at 21%.

Atlas Energy, which provides drillers with sand used in fracking, has been a punching bag for investors in 2025. Its stock has slid 44% this year, to around $12.50 from $23. The stock took a hit earlier this month, when the company reported first-quarter earnings that missed analysts estimates. Atlas Energy's Dune Express conveyor belt, which began commercial operations in January, posted higher-than-expected costs for the period.

But investors might be too quick to write off the stock. The Dune Express is a 42 mile-long electric belt that brings fracking sand from Texas to Permian Basin locations in New Mexico. The $400 million project is a sizeable gamble for Atlas Energy, but it could still see a big payoff.

As Barron's Energy Insider newsletter previously noted, the conveyor belt can deliver 500 tons of sand a day, compared with 125 to 150 tons for Atlas's trucks, while also cutting costs. And Atlas shares are cheap -- trading at only about 14 times 2026 earnings.

The company still has plenty of fans. Piper Sandler analyst Derek Podhaizer initiated coverage of Atlas in March with an "Overweight" rating. Atlas Energy "isn't just a debate stock, it's a divisive one," he wrote at the time.

Following the company's disappointing earnings release on May 5, Podhaizer cut his price target to $16 from $22. But that still represents about 29% upside against Wednesday's $12.45 closing price. He still expects the Dune Express to pay dividends, predicting the conveyor belt's volumes will pick up in the second quarter.

He notes the cost advantage of the Dune Express compared with traditional trucking, saying it only takes $2 per ton of sand sent down the conveyor belt.

"The cost structure of the Dune Express is clearly attractive," he wrote.

Write to Ian Salisbury at ian.salisbury@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 29, 2025 03:00 ET (07:00 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.