On Thursday, KeyBanc reiterated its Overweight rating on Matador Resources Company (NYSE:MTDR) with a steady price target of $76.00. The firm's positive stance comes after an analysis of Matador's recent $1.9 billion acquisition.
According to the firm, the new assets should compete for capital effectively and are expected to be accretive to the company's enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) and enterprise value to cash flow (EV/CF) by 2025.
The firm's updated model suggests that Matador's leverage could decrease to 0.9 times by the second quarter of 2025. Additionally, the acquisition includes a 19% interest in Pinon Midstream, which is anticipated to further enhance Matador's midstream assets beyond its existing San Mateo joint venture. Midstream assets, which typically trade at higher multiples than Matador's current trading multiple, could provide opportunities for sales that would accelerate the company's deleveraging process and underscore the value of its midstream holdings.
In other recent news, Matador Resources has been the focus of several recent developments. The energy company has acquired Ameredev for $1.9 billion, a strategic decision to expand its presence in the Delaware Basin. The acquisition, entirely cash-funded, has been well received by BMO Capital Markets, who maintained an Outperform rating on Matador Resources. The firm also projects a 15% increase in cash flow per share and a 22% rise in free cash flow by 2025 due to the acquisition.
In addition, Truist Securities has increased its price target for Matador Resources shares to $91 from $87, maintaining a Buy rating. This decision was influenced by the company's strategic acquisition, which is expected to significantly improve Matador's free cash flow after the projected third-quarter 2024 completion.
Moreover, the company reported a strong first quarter in 2024, with an increase in flow assurance and a strengthened balance sheet. This performance led to a raised full-year guidance.
InvestingPro Insights
Expanding on KeyBanc's optimistic outlook on Matador Resources Company (NYSE:MTDR), InvestingPro metrics complement this view with a robust financial profile. As of the last twelve months leading up to Q1 2024, Matador has showcased a notable P/E ratio of 7.73, which slightly adjusts to 8.14 in the same period, reflecting a valuation that may appeal to value investors. Additionally, the company's revenue growth for Q1 2024 surged by 39.68%, signaling strong operational performance. The gross profit margin stands impressively at 80.19%, underscoring the company's efficiency in managing its operations.
From an investment perspective, Matador has demonstrated a commitment to shareholder returns, with its dividend yield at 1.35% and a significant dividend growth of 33.33% over the last twelve months. These figures align with one of the InvestingPro Tips indicating that Matador has raised its dividend for three consecutive years. Moreover, Matador's stock has achieved a solid one-year price total return of 16.82%, adding to the attractiveness of the investment.
For investors seeking additional insights and tips, InvestingPro offers even more detailed analysis, including six analysts who have revised their earnings upwards for the upcoming period, suggesting potential for future growth. It's worth noting that while the stock generally trades with low price volatility, there have been instances of volatility in stock price movements. Interested investors can explore these nuances further and access additional tips on InvestingPro. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, which includes a total of 8 additional InvestingPro Tips to guide investment decisions.
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