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Chesapeake Far Too Risky for Retail Investors

Tuesday, 1 May 2012 | 8:10 PM ET

In the after market, the Fast Money pros took another look at Chesapeake after the beleaguered nat gas company reported earnings and revenue that missed Wall Street's expectations on Tuesday

With shares down 5% after hours, trader Guy Adami says if you’re looking to play this stock you're essentially playing a game of chance.

"You’re either going to be very right or very wrong. This stock could have a $30 handle or a $5 handle," he says.

And Adami's instinct suggests you'll be wrong.

“Aubrey McClendon stepping down as chairman could open a whole can of worms. I can’t help but wonder, is something catastrophic about to happen.”

Adami is referring to news released earlier in the day, in which the company said its chief executive, Aubrey McClendon, would relinquish his title as executive chairman at the urging of shareholders seeking to improve the oil and gas company's governance.

Last week regulators opened an informal inquiry into Chesapeake’s controversial program that granted McClendon a share in each of the natural gas producer's wells.

"People who watch CNBC's Fast Money have no business in this stock," adds trader Joe Terranova. He says there are plenty of alternatives in the space and can’t imagine why a serious nat gas investor would put money to work in Chesapeake considering all the headline risks.

Chesapeake Energy Shares Drop 2% on Earnings Miss
The Fast Money traders weigh in on the trade on CHK, and Timothy Rezvan, Sterne Agee analyst, breaks down the disappointing numbers on Chesapeake Energy, reporting Q1 EPS of $0.18 ex-items vs. FactShet $0.28. Also, CNBC's Jon Fortt reports on the after-hours action in shares of Broadcom.

“Pioneer , EOG and Noble all have solid balance sheets. Nat gas investors will go there, not Chesapeake,” says Terranova.

By the numbers, Chesapeake reported a net loss of $71 million, or 11 cents per share, compared with a net loss of $205 million, or 32 cents per share, in the same quarter a year earlier.

Analysts had expected the company to report earnings excluding items of 29 cents a share on $2.75 billion in revenue, according to a consensus estimate from Thomson Reuters.



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Trader disclosure: On May 1, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Keith McCullough is long GLD; Joe Terranova is long VRTS; Joe Terranova is long MCD; Joe Terranova is long JNPR; Joe Terranova is long NXPI; Joe Terranova is long JPM; Joe Terranova is long JOY; Joe Terranova is long HPQ; Joe Terranova is long LQD; Tim Seymour is long BAC; Tim Seymour is long SBUX; Tim Seymour is long FCX; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long MSFT; Guy Adami is long NUE; Guy Adami is long BTU; Guy Adami is long AGU; Steven Weiss is long AIG; Steven Weiss is long QCOM

For Timothy Rezvan
Sterne, Agee & Leach, Inc. makes a market in the following subject company Chesapeake Energy Corp: CHK
Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach, Inc.'s total revenues, a portion of which is generated by investment banking activities.
Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject company and/or companies in the next three months.

Nicole Miller Regan
The following companies have been investment banking clients of Piper Jaffray during the past 12 months: BBRG
The following companies have been investment banking clients of Piper Jaffray during the past 12 months: GMCR
Other material conflicts of interest for Nicole Miller Regan or Piper Jaffray regarding companies in my universe for which I am aware include: GMCR: underwriting
Piper Jaffray received non-investment banking securities-related compensation from the following companies during the past 12 months: SONC
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: BAGL
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: BBRG
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: BJRI
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: CAKE
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: CCSC
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: GMCR
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: PEET
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: PFCB
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis PNRA
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: RRGB
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: RUTH
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: SBUX
Piper Jaffray makes a market in the securities of the following companies, and will buy and sell the securities of these companies on a principal basis: SONC

CNBC.com with wires.

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