On Friday, BMO Capital has adjusted its outlook on Intrepid Potash (NYSE:IPI), increasing the stock's price target to $23 from the previous $21. The firm has maintained its Market Perform rating on the shares. The revision follows the company's first-quarter results, which prompted the analyst to revise their estimates upwards, primarily due to increased prices for Potash and Trio.
The new price target is based on approximately 7.5 to 8 times the company's projected 2025 enterprise value to EBITDA (EV/EBITDA) and about 10 to 11 times the expected 2024 EV/EBITDA. These multiples represent a premium compared to Intrepid Potash's peers in the market. The company continues to focus on increasing its potash production volumes and reducing costs.
In addition to the performance metrics, there is a potential upside from further payments from XTO Energy, a subsidiary of Exxon Mobil (NYSE:XOM), related to drilling activities in the Permian Basin. The analyst noted that a second payment of $50 million, if received, could be equivalent to approximately $4 per share, which would reduce the company's valuation multiples by around 1.5 times.
The firm's revised price target reflects a more optimistic view of Intrepid Potash's financial prospects, driven by stronger product pricing. It also takes into account the company's narrative as a volume and cost recovery story within the potash industry.
The financial institution's commentary suggests that while the stock maintains a Market Perform rating, there are factors such as market prices and potential additional income that could influence the company's valuation and performance moving forward.
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