On Thursday, Civitas Resources (NYSE:CIVI) received a Buy rating from TD Cowen, accompanied by a stock price target of $90.00. The firm highlighted Civitas as an undervalued stock with a robust free cash flow (FCF) yield of 12%, which leads its peers, and a corporate breakeven point at $52 per barrel of oil.
The coverage initiation by TD Cowen pointed out the company's strengthened financial position following acquisitions in the Permian Basin during 2023. These strategic moves have been noted to mitigate the risks associated with the company's operations in the Denver-Julesburg (DJ) Basin, especially considering the recent regulatory concerns in Colorado.
TD Cowen's analyst believes that Civitas Resources is poised for a re-rating based on its performance and continued success in the Permian Basin. The firm's positive outlook on the company is rooted in the sustainability of its free cash flow, which has seen substantial improvement due to the recent acquisitions.
The $90 price target is based on a net asset value (NAV) per share calculation, reflecting the intrinsic value of the company's assets. The analyst's remarks suggest confidence in Civitas Resources' ability to maintain its leading free cash flow yield and to navigate through any potential regulatory challenges in Colorado.
Civitas Resources' stock is expected to respond to the new coverage as investors consider TD Cowen's analysis and the company's prospects for continued execution in the Permian Basin. The Buy rating and price target set by TD Cowen serve as indicators of the firm's bullish stance on the energy company's stock.
In other recent news, Civitas Resources has been making significant strides in its operations and financial activities. The company recently announced a successful Q1 2024 performance, highlighted by robust operational efficiency and the early achievement of its divestment goal, with $300 million in non-core assets sold. Moreover, Civitas returned $215 million to shareholders through a share repurchase agreement.
On the analyst front, RBC Capital Markets initiated coverage on Civitas with an Outperform rating and a price target of $90.00 per share, citing the company's asset quality, operational efficiency, and reduced regulatory concerns.
Meanwhile, CapitalOne reaffirmed its positive stance on Civitas with an Overweight rating and a steady price target of $97.00 per share, following the company's recent secondary offering. Truist Securities also adjusted its price target for Civitas from $103 to $105, while maintaining a Buy rating, acknowledging the company's effective integration of its operations in the Permian Basin.
In other developments, Civitas launched a public offering of approximately 6.96 million shares of its common stock, offered by an affiliate of the Canada Pension Plan Investment Board. The company did not sell any shares nor receive proceeds from the sale. These recent events reflect Civitas Resources' aggressive strategy in managing its capital and rewarding its investors.
InvestingPro Insights
Following the positive outlook from TD Cowen, Civitas Resources (NYSE:CIVI) demonstrates several financial strengths that could further interest investors. With a market capitalization of $6.69 billion and a trailing P/E ratio of 7.85, the company presents as a potentially undervalued investment opportunity. Civitas not only pays a significant dividend to shareholders but has also raised its dividend for three consecutive years, showcasing its commitment to returning value to investors.
InvestingPro Tips indicate that Civitas has been profitable over the last twelve months and analysts predict the company will remain profitable this year. Moreover, Civitas has enjoyed a strong return over the last five years, which may appeal to investors looking for stable long-term growth. Still, it is worth noting that the company's short-term obligations currently exceed its liquid assets, which could present a liquidity risk.
For those interested in a deeper dive into Civitas Resources' financial health and future prospects, there are additional InvestingPro Tips available. By using the coupon code PRONEWS24, investors can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, granting access to a comprehensive suite of investment tools and insights. With more tips available on InvestingPro, investors can make more informed decisions backed by real-time data and expert analysis.
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