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On Friday, Mizuho (NYSE:MFG) Securities adjusted its outlook on California Resources Corporation (NYSE:CRC) by reducing the stock's price target to $64 from the previous $68, while still maintaining an Outperform rating on the shares. The adjustment comes as Mizuho anticipates a strong first-quarter performance from the company, projecting a 36% beat on first-quarter 2025 free cash flow (FCF) compared to the consensus. According to InvestingPro data, analysts' targets for CRC range from $36 to $75, with the stock currently trading at $33.49. InvestingPro analysis indicates the stock is significantly undervalued at current levels.
The research firm's analyst notes that despite the lowered net asset value (NAV)-based target, the valuation of California Resources remains attractive, particularly when considering its upstream assets alone. This view is supported by the company's solid fundamentals, with InvestingPro data showing a healthy EV/EBITDA ratio of 3.6x and price-to-book ratio of 0.87. The unrecognized potential in the company's Power and Carbon Capture and Storage (CCS) segments adds to its appeal. Operationally, the analyst expects the company to deliver an in-line quarter, successfully managing its base decline as per its plans, amidst a backdrop of mixed commodity prices versus its March guidance.
Mizuho's updated model emphasizes the sum-of-the-parts (SOTP) potential for California Resources, estimating the Upstream NAV at approximately $50 per share, which translates to 0.6 times the price-to-NAV ratio. Additionally, Mizuho values the company's 800 MW of existing power generation in California at around $14 per share, not accounting for the potential impact of Datacenter Power Purchase Agreements (PPA).
Furthermore, Mizuho has introduced a model for the CCS business, marking the first Final Investment Decision (FID) in the first quarter of 2025. This model assigns a risked value of $7 per share to the CCS segment, with an unrisked potential of $25 per share, which is not factored into the NAV-based price target. The analyst reaffirms the Outperform rating, signaling confidence in the company's overall value and prospects.
In other recent news, California Resources Corporation reported its fourth-quarter 2024 earnings, which fell short of expectations. The company announced an earnings per share (EPS) of $0.91, missing the projected $0.9898, and reported revenue of $877 million, below the forecasted $908.46 million. Barclays (LON:BARC) analyst Betty Jiang noted that while the company's fourth-quarter results were solid, there was a significant reduction in capital expenditures, which were below market expectations by up to 18%. Jiang adjusted the price target for California Resources to $55, down from $57, while maintaining an Equalweight rating.
Meanwhile, Truist Securities maintained a Buy rating with a $75 price target, expressing confidence in the company's operational model and potential data center contract, which could leverage California Resources' capabilities. However, Citi analysts downgraded the stock from Buy to Neutral, citing concerns over the company's higher-cost production in California and a reduction in the price target to $36 from $62. Despite these mixed analyst views, California Resources continues to focus on carbon capture and storage initiatives, which are seen as key to its long-term strategy.
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