On Monday, Truist Securities adjusted its price target for shares of Northern Oil and Gas (NYSE:NOG), reducing the figure to $54.00 from the previous target of $57.00. Despite the lower price target, the firm continues to endorse the stock with a Buy rating.
The adjustment in the price target comes after Truist Securities recalibrated its financial model to reflect an updated price deck and revised forecasts for the years 2024, 2025, and 2026. The new target is based on a combination of valuation methodologies.
According to the Truist analyst, the first method employs an enterprise value to EBITDAX (EV/EBITDAX) multiple of 4.5 times, which is above the peer average of 3.9 times. This multiple is applied to the firm's projected EBITDAX for 2025, which is estimated to be $1,817 million. This figure surpasses the consensus estimate of $1,705 million among industry analysts.
In addition to the EV/EBITDAX multiple, the second valuation technique involves a free cash flow to enterprise value (FCF/EV) yield assumption of 12.0 percent. The combination of these two methods has led to the establishment of the $54 price target.
The maintained Buy rating suggests that Truist Securities remains optimistic about the performance potential of Northern Oil and Gas. The firm's analysis indicates a belief that the company's stock holds value for investors, even with the revised price target reflecting a more conservative outlook than before.
Northern Oil and Gas is a company that operates within the energy sector, specifically focusing on the exploration and production of oil and natural gas. The revised price target and continued positive rating may influence investor sentiment and market activity related to the company's shares.
In other recent news, Northern Oil and Gas has been making significant strides in the energy sector. RBC Capital has maintained an Outperform rating on the company, highlighting its recent joint venture initiatives and the expansion of its position in the Uinta Basin. The company has also announced a joint venture with SM Energy (NYSE:SM), valued at $510 million, which is expected to enhance its portfolio and improve its financial outlook. This move has been acknowledged by Truist Securities, which increased the price target for Northern Oil and Gas shares to $57.00.
Furthermore, Northern Oil and Gas reported strong first-quarter results for 2024, surpassing expectations due to effective well performance and increased operational activity. The company has also announced a joint venture to acquire XCL Resources, aligning with its strategy of partnering with high-caliber operators for accretive opportunities.
Lastly, SM Energy Company has acquired oil and gas assets in the Uinta Basin from XCL Resources, LLC affiliates for $2.55 billion. Northern Oil and Gas is set to acquire a 20% interest in these assets as part of this deal, which is expected to increase 2025E Adjusted EBITDAX by 35%, 2025E Adjusted free cash flow by 45%, and 2025E cash production margin by 11%.
InvestingPro Insights
In light of Truist Securities' updated price target for Northern Oil and Gas (NYSE:NOG), current InvestingPro data provides additional context for investors considering the company's stock. With a market capitalization of approximately $4.13 billion and a compelling P/E ratio of 6.62, Northern Oil and Gas showcases financial stability. Moreover, the company's adjusted P/E ratio for the last twelve months as of Q1 2024 stands at 6.87, reflecting consistent earnings performance.
InvestingPro Tips for Northern Oil and Gas highlight that the stock is trading near its 52-week high and has shown a strong return over the last month, with a 13.59% price total return. Additionally, the company has raised its dividend for three consecutive years, indicating a commitment to delivering shareholder value. With analysts predicting profitability for the current year and a proven track record of profitability over the last twelve months, NOG presents a potentially attractive opportunity for investors seeking growth and stability.
For those interested in deeper analysis and additional insights, InvestingPro offers more tips to help make informed decisions. There are currently seven additional InvestingPro Tips available for Northern Oil and Gas, which can be accessed at https://www.investing.com/pro/NOG. Investors can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, enhancing their investment research with valuable resources.
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