Mizuho cuts SM Energy stock price target to $48, keeps Outperform

On Monday, Mizuho (NYSE:MFG) Securities adjusted its outlook on SM Energy (NYSE:SM), reducing the company’s price target from $55.00 to $48.00. Despite this change, the firm maintains an Outperform rating on the stock. The revision comes as analysts anticipate the market’s attention to center on the company’s capital expenditures for 2025 and the integration of the Uinta Basin assets. According to InvestingPro data, SM Energy’s stock has experienced significant volatility, with the share price down about 51% over the past six months, though analysts maintain a consensus target range of $33-62.

Mizuho’s analysts expect SM Energy’s first-quarter cash flow per share (CFPS) and earnings before interest, tax, depreciation, and exploration costs (EBITDX) to be approximately 2-3% higher than the consensus, driven by stronger gas and natural gas liquids (NGL) pricing. Oil volumes are projected to align with guidance and consensus figures. The firm is also looking ahead to updates on potential increases in non-operated capital expenditures in the second half of 2025, which are not currently included in SM Energy’s initial $1.3 billion budget. These additional expenditures could lead to higher spending in 2025 but are also expected to contribute to increased production volumes in 2026. The company currently maintains strong profitability with an impressive 81% gross margin and has consistently paid dividends for 33 consecutive years, with a current yield of 3.7%. InvestingPro subscribers can access 12 additional key financial metrics and tips that provide deeper insights into SM Energy’s financial health and growth potential.

As SM Energy takes on its first quarter as the operator of the Uinta assets, Mizuho is keen to observe how the company progresses with the integration of these assets. The firm has updated its net asset value (NAV) for the year-end 2024 reserves and adjusted operating cost and inventory assumptions, which informed the decision to lower the price target.

The Outperform rating suggests that Mizuho continues to view SM Energy favorably, despite the adjustment in the price target. The firm’s commentary indicates a belief in the company’s ability to perform well financially, particularly with regard to its recent acquisition and future capital deployment.

In other recent news, SM Energy has announced a significant change in its Board of Directors. Dr. Stephen R. Brand, a long-standing board member, will retire at the conclusion of the company’s next annual stockholders meeting in May 2025. This development was disclosed in an 8-K filing with the Securities and Exchange Commission, confirming that his departure is not due to any disagreements with the company. Meanwhile, Raymond (NSE:RYMD) James has adjusted its outlook on SM Energy, maintaining an Outperform rating but lowering the price target from $59.00 to $40.00. This revision follows the release of SM Energy’s fourth-quarter 2024 results and reflects the recent decline in oil prices. The firm’s analysis anticipates first-quarter 2025 production to be 195 thousand barrels of oil equivalent per day, consistent with company guidance, and projects full-year 2025 production to be around 208 MBoe/d. Capital expenditures for the first quarter are estimated at approximately $428 million, aligning with company expectations. Despite the reduced price target, Raymond James continues to view SM Energy positively, noting its free cash flow yield and EV/EBITDA multiple.

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