KeyBanc cuts BKV Corp price target to $25, maintains Overweight

On Tuesday, KeyBanc Capital Markets adjusted its price target on shares of BKV Corp (NYSE: BKV), reducing it to $25.00 from the previous $27.00, while retaining an Overweight rating on the stock. The revision follows a recent announcement by BKV Corp regarding a less-than-expected earnings projection for its Power joint venture. The stock, currently trading at $18.60, has experienced significant pressure, falling nearly 15% in the past week. According to InvestingPro data, analyst price targets for BKV range from $24 to $33, suggesting potential upside despite recent challenges.

Tim Rezvan of KeyBanc expressed concerns about the Power segment’s outlook, which led to the price target adjustment. He noted that the gross EBITDA guidance for the Power JV was set between $130 million and $170 million, a figure that falls short of the steady state EBITDA range of $200 million to $250 million previously anticipated. The company’s current enterprise value to EBITDA multiple stands at 25.74x, reflecting high growth expectations. InvestingPro subscribers can access 10+ additional key metrics and insights about BKV’s valuation and growth prospects.

The analyst highlighted the significance of the Power segment to BKV’s overall valuation, describing it as "the most richly valued segment we forecast for the Company." The reduced earnings outlook for this segment has a direct influence on the company’s valuation, prompting the adjustment in the Sum of the Parts (SOTP)-based price target. With a market capitalization of $1.64 billion and a current ratio of 0.57, InvestingPro analysis indicates that BKV’s short-term obligations exceed its liquid assets, adding complexity to its financial outlook.

The Power joint venture is a crucial component of BKV’s operations, and its performance is closely watched by investors and analysts alike. The lowered guidance suggests that there may be challenges ahead for this segment, which could have implications for BKV’s financial performance.

Despite the lowered price target, KeyBanc’s Overweight rating indicates that the firm still sees potential in BKV Corp’s stock. This rating suggests that KeyBanc analysts believe the stock could outperform the average total return of the stocks in the analyst’s coverage universe over the next 12 to 18 months. The Overweight rating remains unchanged, signaling continued confidence in the company’s long-term prospects despite the near-term headwinds.

In other recent news, BKV Corporation reported a net loss of $57 million for the fourth quarter of 2024, with earnings per share at $0.01. The company’s revenue for the quarter was $119.78 million. Despite the loss, BKV generated a positive adjusted free cash flow of $92 million for the year, and its total liquidity reached $436 million by year-end. The company is projecting its 2025 production to range between 755-790 million cubic feet equivalent per day and plans to invest $320-380 million in capital expenditures, focusing on upstream development and carbon capture initiatives.

BKV is actively exploring additional power plant construction and potential partnerships in carbon capture, with ongoing discussions about power purchase agreements for data centers. The company reached a financial investment decision on a new carbon capture project and is in talks for a joint venture with a potential 49% partner participation. Analysts from firms such as Citigroup (NYSE:C) and Mizuho (NYSE:MFG) Securities have shown interest in BKV’s strategic moves, particularly in the power and carbon capture sectors. These developments reflect BKV’s strategy to integrate traditional and new energy approaches to deliver value.

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