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On Monday, BofA Securities analyst Doug Leggate adjusted the price target on Gulfport Energy (NYSE:GPOR) stock, reducing it slightly to $224 from the previous $227 while reaffirming a Buy rating on the shares. With the stock currently trading at $168.87, analysts see significant upside potential, with targets ranging from $170 to $263. The adjustment follows Leggate’s earlier decision to upgrade the stock, a position he continues to support based on the company’s strong financial outlook. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculation.
Leggate’s confidence in Gulfport Energy is rooted in its leading position in terms of free cash flow yield, which he believes has the potential to drive the stock’s value upwards. The company generated $195.94 million in levered free cash flow over the last twelve months, with a free cash flow yield of 6%. InvestingPro data confirms management’s aggressive share buyback strategy, which could significantly impact shareholder value. This substantial cash generation capacity is expected to enable the company to buy back 16% of its shares outstanding.
The analyst highlights the impact of share buybacks on the company’s enterprise value to EBITDA ratio (EV/EBITDA), a key metric used to assess a company’s valuation. If Gulfport Energy were to allocate all its free cash flow to repurchasing shares, Leggate estimates that by the end of 2025, the company’s EV/EBITDA would decrease to 3.4 times from the current projection of 4 times.
The long-term outlook for Gulfport Energy is also positive, with Leggate noting the company’s ability to sustain its free cash flow over an extended period. He anticipates that the energy firm could potentially repurchase its entire market capitalization by the end of 2030, demonstrating a robust financial capacity.
Leggate’s analysis and the subsequent price target adjustment reflect a nuanced view of Gulfport Energy’s financial strategies and their expected impact on the company’s future performance. While the target has been lowered slightly, the underlying optimism regarding the company’s cash flow and share repurchase potential remains a central theme in his assessment.
In other recent news, Gulfport Energy reported its fourth-quarter 2024 earnings, which revealed a mixed financial performance. The company exceeded expectations with an earnings per share (EPS) of $4.74, surpassing the forecasted $4.32. However, its revenue of $239.87 million significantly missed the anticipated $334.06 million. Following this earnings release, TD Cowen maintained a Hold rating on Gulfport Energy, slightly increasing the price target from $185.00 to $187.00. The analyst noted that while Gulfport Energy shows potential in terms of yield, it has been underperforming compared to its natural gas peers due to a projected decline in volumes for the first quarter of 2025. Gulfport Energy plans to maintain flat total production while increasing liquids production by 30% in 2025, focusing on operational efficiencies and cost reductions. The company also holds a strong liquidity position with $900 million as of the end of 2024. Despite the revenue shortfall, Gulfport Energy’s strategic hedging positions and focus on hydrocarbon diversification could position it well in the evolving natural gas environment.
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