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Investing.com - Morgan Stanley initiated coverage on Viper Energy (NASDAQ:VNOM) with an Overweight rating and a $46.00 price target on Monday. The $10.9 billion market cap company currently trades at a P/E ratio of 11.4, which according to InvestingPro analysis, represents an attractive valuation relative to its near-term earnings growth potential.
The investment bank highlighted that Viper Energy passively owns mineral rights and royalty interests, approximately 95,000 pro-forma net royalty acres with about 52% oil mix, primarily located in the Permian basin. The company maintains an impressive 98.9% gross profit margin and demonstrates strong financial health, earning a GOOD rating from InvestingPro’s comprehensive analysis framework.
Following the Sitio acquisition, Diamondback Energy is expected to operate about 43% of Viper’s Permian net royalty acres and more than 45% of 2026 oil production, serving as a key growth driver. The remaining acreage is largely operated by well-capitalized, low-cost Permian producers including Exxon Mobil, Chevron, Occidental, EOG Resources, and ConocoPhillips.
Morgan Stanley noted that Viper Energy generates robust free cash flow without capital requirements and minimal operating costs. In 2024, VNOM’s free cash flow per barrel of oil equivalent averaged $34, compared to $31 for mineral peers and $10 for oil exploration and production companies.
The company returns at least 75% of available cash to equity holders through base dividends ($1.32 per Class A share annually), variable dividends, and share repurchases, while allocating remaining cash flow toward reaching its $1.5 billion net debt target, estimated to be achieved in the fourth quarter of 2026 at $60 WTI. Currently offering an attractive 8.1% dividend yield, Viper Energy stands out among its peers. For detailed valuation metrics and 10 additional key insights about VNOM, investors can access the full analysis on InvestingPro, which includes a comprehensive Pro Research Report covering what really matters for informed investment decisions.
In other recent news, Viper Energy reported a robust performance for the second quarter of 2025, with earnings per share reaching $0.41, surpassing analyst expectations of $0.36 by 13.89%. The company’s revenue also exceeded forecasts, totaling $297 million compared to the anticipated $287.21 million. Despite these positive financial results, Raymond James adjusted its price target for Viper Energy, lowering it to $56 from $57, while maintaining an Outperform rating. This adjustment followed Viper’s second-quarter returns of capital, which were $0.56 per share, approximately 7% below Raymond James and Street expectations of $0.60 per share. These developments highlight the company’s ability to exceed earnings and revenue projections, while also facing adjustments in analyst price targets.
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