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On Monday, APA Corp. (NASDAQ:APA) experienced a change in stock rating as Raymond (NSE:RYMD) James analysts downgraded the company from Strong Buy to Outperform. Accompanying this rating change, the price target was also adjusted, now set at $32.00, a decrease from the previous target of $45.00. According to InvestingPro data, the stock is currently trading near its 52-week low of $17.66, with technical indicators suggesting oversold conditions. The stock’s current market capitalization stands at $6.86 billion.
Raymond James’ revision follows the fourth-quarter performance review and the notable decline in oil prices. APA Corp.’s first-quarter 2025 production is projected to be around 465 thousand barrels of oil equivalent per day (MBoe/d), with approximately 50.3% being oil, and capital expenditures are estimated at $765 million. These figures align closely with the company’s guidance. Although production was marginally lower than Raymond James and other analysts’ earlier predictions, capital expenditures were about 16% higher. The company maintains impressive operational efficiency with a gross profit margin of 69.18% and generates annual revenue of $9.47 billion.
Despite these shifts, APA Corp. has maintained its production and capital expenditure guidance for 2025. The company’s Free Cash Flow Yield (FCF/EV) for the estimated year 2025 stands at around 10%, placing it towards the higher end among its peers. The downgrade was influenced by the recent cost-cutting measures which did not meet the expected impacts in terms of scale and timing. The absence of a near-term catalyst and the prevailing uncertainty in oil prices also contributed to the more conservative outlook from Raymond James. InvestingPro analysis indicates the stock is currently undervalued, trading at an attractive P/E ratio of 8.26x while offering a substantial dividend yield of 5.31%. For deeper insights into APA’s valuation and over 30 additional key metrics, investors can access the comprehensive Pro Research Report available on InvestingPro.
The analyst at Raymond James expressed a tempered enthusiasm for APA Corp., citing the disappointing cost savings and lack of immediate growth drivers. The reduced price target reflects the weakened oil price environment compared to previous assessments. Nine analysts have recently revised their earnings expectations downward for the upcoming period, as revealed by InvestingPro data.
In other recent news, APA Corporation has reported its fourth-quarter 2024 earnings, revealing results that fell short of analysts’ expectations. The company’s adjusted earnings per share (EPS) was $0.79, missing the forecast of $0.9767, while revenue totaled $2.19 billion, below the expected $2.28 billion. This earnings release was accompanied by an announcement of a significant cost-cutting initiative targeting $350 million in savings by 2027. Evercore ISI recently adjusted its financial outlook for APA, reducing the price target from $30.00 to $25.00 while maintaining an In Line rating, citing the company’s focus on its Permian and Egypt operations. Meanwhile, CFRA upgraded APA’s stock rating from "Strong Sell" to "Sell" and maintained a price target of $19.00, noting APA’s cost-saving initiatives and a gas price agreement in Egypt. The company’s strategic initiatives, including a focus on gas production in Egypt, are seen as potential drivers for future growth. Additionally, APA has set a total capital budget of $2.5 to $2.6 billion for 2025, with plans to maintain flat production in the Permian Basin through 2029. These developments reflect APA’s ongoing efforts to navigate market challenges and enhance its operational efficiency.
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