On Monday, Truist Securities adjusted its outlook for Magnolia Oil & Gas Corp. (NYSE: NYSE:MGY) shares, reducing the price target to $34 from the previous $35 while maintaining a Buy rating on the stock. The revision reflects updates to the company's financial model, including changes to the price deck and forecasts for the years 2024 through 2026.
The new price target of $34 is based on two equally weighted valuation methods. The first method applies a 5.5x multiple to the firm's 2025 estimated EBITDAX (Earnings Before Interest, Taxes, Depreciation, Amortization, and Exploration expenses) of $1,177 million, which is above the consensus estimate of $1,067 million. This multiple is significantly higher than the peer average of 3.9x.
The second valuation method used by Truist Securities is based on a Free Cash Flow (FCF) to Enterprise Value (EV) Yield assumption of 10.0%. This dual approach to valuation aims to provide a comprehensive view of the company's potential financial performance and market position.
The analyst's commentary accompanying the price target adjustment highlighted the changes to the firm's model and provided a rationale for the valuation methods chosen. The emphasis was on the company's expected EBITDAX for 2025 and the calculated FCF/EV Yield, which together form the basis for the revised price target.
Magnolia Oil & Gas Corp., listed on the New York Stock Exchange, is in the business of hydrocarbon exploration and production. It focuses on operations in the United States and is monitored by investors for its performance in the energy sector. The price target revision by Truist Securities reflects the latest available financial data and projections for the company.
In other recent news, Magnolia Oil & Gas Corporation reported a robust start to 2024, with a total adjusted net income of $101 million for the first quarter. The company experienced a 7% year-over-year production growth, reaching 84,800 barrels of oil equivalent per day. In addition to this, the company completed a significant acquisition in the Giddings area, which has strengthened its position.
In a related development, Magnolia has also seen some significant transactions involving its shareholders. Certain affiliates of EnerVest, Ltd., known as the Selling Stockholders, agreed to sell 12 million shares of Magnolia's Class A common stock in an unregistered secondary block trade. Magnolia committed to purchasing 3 million shares of its Class B common stock from the Selling Stockholders.
Truist Securities has maintained a Buy rating on Magnolia Oil & Gas Corp., raising its price target for the company's shares to $35 from the previous $33. The firm's confidence in Magnolia's strategic plans was reaffirmed following investor meetings, citing the company's continued strategic mergers and acquisitions, asset delineation, operational efficiencies, and cost reduction.
These are recent developments that highlight the company's commitment to growth and efficiency. The company's focus on generating free cash flow and returning value to shareholders, as well as its investment in high-quality assets and operational optimization, continues to be a significant factor in its performance in the oil and gas sector.
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