On Thursday, Mizuho Securities adjusted its outlook on Apache Corp (NASDAQ:APA), a Houston-based energy company, by reducing the stock's price target to $32 from $34, while retaining an underperform rating. The adjustment follows Apache's latest announcements, which included pro-forma guidance for 2024 and initial results from its exploration activities in Alaska.
Apache's recent guidance for the upcoming year has seemingly fallen short of market expectations. The company projected lower oil volumes coupled with an increase in capital expenditure, which did not resonate well with investors. Additionally, while Apache has reported an oil discovery at its first well in Alaska, further exploration and appraisal efforts, as well as any potential resource estimates, are not expected until 2025 or later.
Despite the discovery in Alaska, the company's stock has not fared well compared to its peers year-to-date, showing a 15% decline against an 8% rise in the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP). This underperformance has occurred even with Apache's announcement of a 50% increase in expected synergies from the CPE deal, now estimated at around $75 million.
According to the company, the original synergy projections were very conservative.
The firm's decision to lower the net asset value-based price target to $32 reflects these developments and the analyst's reiterated underperform rating on the stock. Apache Corp's shares have faced a moderately negative reaction following the public relations update, indicating that the market's expectations were higher ahead of the company's announcements.
InvestingPro Insights
Apache Corp's recent performance and future outlook have been a topic of interest for investors and analysts alike. The company's commitment to shareholder returns is evidenced by its track record of maintaining dividend payments for 54 consecutive years, an impressive feat that underscores its financial stability. This dedication to dividends is a key highlight for income-focused investors and is reflected in a current dividend yield of 3.28% as of the first quarter of 2024.
When it comes to valuation, Apache is trading at a Price/Earnings (P/E) ratio of 3.31, which is below the industry average, suggesting that the stock might be undervalued. This is further supported by the company's low PEG ratio of 0.1 for the last twelve months as of Q1 2024, indicating potential growth at a reasonable price. Additionally, the stock is currently trading near its 52-week low, which could present a buying opportunity for value investors.
For those considering an investment in Apache, it's worth noting that the company is predicted to remain profitable this year, with a solid performance over the last twelve months. This financial health is also reflected in a strong return on assets of 21.96% for the same period. Interested investors can find more InvestingPro Tips for Apache Corp on InvestingPro, with an additional 10% off yearly or biyearly Pro and Pro+ subscriptions using the coupon code PRONEWS24. There are currently 5 additional InvestingPro Tips available, offering deeper insights into the company's performance and potential investment strategies.
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