Friday – CFRA analysts have upgraded Diamondback Energy (NASDAQ:) stock from Hold to Buy, despite lowering the price target slightly to $182 from $184. The upgrade reflects a valuation perspective, as the shares have fallen 21% over the past six months, presenting what CFRA believes to be a buying opportunity. Currently trading at a P/E ratio of 9.14x with a market capitalization of $46.19 billion, InvestingPro analysis suggests the stock is slightly undervalued based on its proprietary Fair Value model.
Jonathan Handshoe of CFRA has adjusted the 12-month target price for Diamondback Energy, taking into account a projected operating cash flow multiple for 2025. The new target price is set at $182, a slight decrease of $2, based on a 5.8x multiple of the projected cash flow.
This valuation is slightly below the company’s long-term forward average, with the discount attributed to potential midstream congestion concerns in the Permian Basin. According to InvestingPro data, analyst targets range from $171 to $255, with a strong buy consensus rating of 1.71 (where 1 is Strong Buy and 5 is Strong Sell).
In addition to the price target adjustment, CFRA has revised its earnings per share (EPS) estimates for Diamondback Energy. The 2024 EPS estimate has been reduced by $0.13 to $15.93, and the 2025 EPS forecast has been cut by $0.24 to $16.29. Despite these revisions and broader macroeconomic concerns, CFRA’s upgrade is influenced by the current stock valuation.
CFRA’s analysis indicates that Diamondback Energy is likely to reinvest about 44% of its projected operating cash flow in 2025, which is the lowest among its peers. However, the company is still expected to achieve above-average production growth, thanks in part to its recent acquisition of Endeavor Energy.
The report also includes a cautious stance on prices for 2025, with CFRA predicting West Texas Intermediate (WTI) to average around $65 per barrel, which is below the current level of $70 per barrel. Nonetheless, CFRA believes that Diamondback Energy’s strategic approach positions the company for long-term success. The company maintains a healthy 5.25% dividend yield and has shown strong revenue growth of 18.25% over the last twelve months.
For deeper insights into Diamondback Energy’s financial health and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, Diamondback Energy has maintained a strong presence in the market.
The company’s earnings call revealed a strategic focus on cost-saving measures and operational efficiency. A projected capital expenditure for 2025 of $4.1 to $4.4 billion was announced, with the aim of maintaining production while executing a more efficient drilling program.
Additionally, Diamondback Energy has been the subject of several analyst ratings. Roth/MKM reiterated its Buy rating, highlighting the company’s status as a low-cost producer in the Permian Basin. Goldman Sachs resumed coverage with a Buy rating, citing the company’s strategic capital allocation and the recent merger with Endeavor Energy as key factors. TD Cowen also maintained a Buy rating with a price target of $255, emphasizing ongoing efficiency gains and a strategic plan for reducing medium-term debt.
The company’s CEO, Travis Stice, recently sold 3,000 shares of Diamondback Energy’s stock. This transaction, likely an automated sale, was associated with restricted share units or performance share units. Despite this, the company continues to maintain a “GOOD” financial health score, with particularly strong marks in profitability metrics.
Finally, Diamondback Energy has made strategic moves to enhance cost efficiency and shareholder value. This includes lowering its corporate breakeven price to $37 per barrel and reducing its drilling program to 18 rigs by 2025. The company is also exploring additional revenue through and surface acreage.
These recent developments highlight Diamondback Energy’s commitment to cost efficiency, shareholder value, and resilience in the face of broader market challenges.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
