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On Monday, Citi analysts revised their price target for Talos Energy (NYSE:TALO) shares, bringing it down to $12.00 from the previous target of $14.50, while retaining a Buy rating on the stock. Currently trading at $8.35, significantly below its 52-week high of $14.67, InvestingPro data shows the stock offers a compelling free cash flow yield. The adjustment follows Talos Energy’s fourth-quarter 2024 earnings release, which revealed an adjusted cash flow of approximately $299.8 million. This performance surpassed both the consensus estimate of around $272.4 million and Citi’s own projection of nearly $297.1 million.
The company’s better-than-expected results were attributed to production levels that slightly exceeded forecasts, in conjunction with lower-than-anticipated capital expenditures. With a market capitalization of $1.51 billion and impressive revenue growth of 35.5% in the last twelve months, Talos Energy also provided promising operational updates on several of its key projects. Citi’s analysis suggests that Talos Energy’s production for the year could marginally surpass the higher end of the company’s projected range, with capital spending expected to align accordingly and operational expenses showing a slight improvement. InvestingPro subscribers can access 6 additional key tips and comprehensive analysis in the Pro Research Report.
The decision to maintain a Buy rating despite the reduction in the price target reflects Citi’s anticipation of Talos Energy’s forthcoming strategic announcements. The market is awaiting further details on the company’s future plans, especially with a new CEO at the helm who is expected to accelerate the strategic communication in the near future. With an EBITDA of $1.24 billion and a strong cash return on invested capital of 12%, Citi’s commentary emphasizes their expectation that Talos Energy will continue to generate considerable free cash flow (FCF) in the upcoming year, which supports the positive outlook on the stock.
In other recent news, Talos Energy reported a strong financial performance for the fourth quarter of 2024, with earnings per share (EPS) significantly exceeding expectations at $0.08, compared to the forecasted $0.02. Despite this positive earnings surprise, the company reported revenue of $485.18 million, which fell short of the anticipated $505.25 million. Additionally, Talos Energy achieved record production levels of 98,700 barrels of oil equivalent per day and a record EBITDA of $362 million for the quarter. The company also reduced its total debt by $550 million in 2024, which contributed to a healthier financial position. Looking ahead, Talos Energy has outlined a capital expenditure plan of $500-$540 million for 2025, with a focus on cost-efficient production enhancements. Analyst feedback from firms such as Texas Capital highlighted the company’s potential upside in the Katmai field, while KeyBanc Capital Markets noted a cautious approach in Talos’s 2025 outlook amidst leadership changes. These developments reflect Talos Energy’s ongoing efforts to balance operational efficiency with strategic growth initiatives.
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