On Tuesday, Citi analyst Scott Gruber adjusted the price target for Atlas (NYSE:ATCO) Energy Solutions Inc (NYSE:AESI), increasing it to $26.00 from the previous $23.00. The firm sustained its Buy rating on the stock. The adjustment follows Atlas Energy's recent acquisition of Hi-Crush, which is anticipated to enhance the company's earnings before interest, taxes, depreciation, and amortization (EBITDA).
Gruber's revised model reflects the expected impact of the acquisition on Atlas Energy's financial performance. The analyst estimates that the company's EBITDA for the first quarter will be around $75 million and projects the EBITDA for the full year 2024 to reach approximately $440 million. These forecasts are slightly higher than the consensus, which predicts a first-quarter EBITDA of $72 million and a 2024 EBITDA of roughly $420 million.
The price target increase to $26 is based on a sum-of-the-parts valuation methodology. Citi applies a 4.5 times multiple to Atlas Energy's projected 2025 proppant (sand) EBITDA and a 6.5 times multiple to the 2025 logistics EBITDA. Following the Hi-Crush acquisition, the multiples were raised by half a turn, as markets often assign higher multiples to companies with greater scale.
Gruber's commentary highlights the rationale behind the raised price target and sustained Buy rating. The analyst notes that the markets typically reward increased scale with higher valuation multiples, which is reflected in the revised price target for Atlas Energy Solutions Inc.
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