How are energy investors positioned?
On Tuesday, Piper Sandler initiated coverage on Expand Energy (NASDAQ:EXE) with a Neutral rating and a price target of $96.00, below the current trading price of $101.42. The new coverage comes as Expand Energy, with a market capitalization of $23.44 billion, stands as the largest domestic gas producer, with significant operations in the Haynesville and Appalachia regions. The company, which is a combination of CHK and SWN, is anticipated to exhibit strong capital efficiency in FY25, having nearly 1 billion cubic feet per day (bcf/d) of productive capacity offline.
Piper Sandler's valuation is based on a Net Asset Value (NAV) methodology that projects 10 years of development within Expand Energy's core operating areas. The firm acknowledges the company's leading position in asset productivity and its strategic geographic advantage. According to InvestingPro data, the stock trades at a P/E ratio of 52.54, suggesting a premium valuation, while maintaining a conservative beta of 0.51, indicating lower volatility compared to the broader market. Expand Energy's approach to Liquified Natural Gas (LNG) is seen as a key factor in meeting the rising global demand for gas, especially with an expected increase in export capacity of approximately 12 bcf/d between FY25 and FY30.
The Neutral rating reflects a long-term gas forecast from Piper Sandler that falls below the FY25/26 strip. Despite this cautious stance, the analysts recognize Expand Energy's potential to benefit significantly from higher gas prices in the exploration and production (E&P) sector. The firm notes that, compared to its peers in the gas industry, Expand Energy's valuation remains attractive.
Piper Sandler's coverage comes at a time when the energy sector is responding to global market dynamics and the increasing importance of gas as an energy source. Expand Energy's positioning in the market, coupled with its LNG strategy, is expected to play a crucial role in its performance and the realization of the $96 price target set by the analysts.
In other recent news, Expand Energy, a major player in the natural gas sector, has been the focus of several analyst firms. TD Cowen initiated coverage with a Hold rating and a price target of $108.00, noting the company's position as the largest natural gas producer in the United States. JPMorgan also initiated coverage, assigning an Overweight rating and a price target of $112.00, citing the company's strategic position in the Haynesville and Appalachia basins.
Citi analysts increased the price target to $125 from the previous $115 while maintaining a Buy rating. The adjustment followed a revision of the company's earnings model, which now anticipates a discretionary cash flow of approximately $802.3 million. Benchmark analysts maintained a positive outlook, reaffirming their Buy rating and a $93.00 price target. They adjusted their fourth-quarter earnings per share and EBITDA estimates upwards to $0.30 and $807 million, respectively.
Mizuho (NYSE:MFG) Securities reiterated its Outperform rating with a price target of $128.00. The firm's analysts anticipate that Expand Energy will slightly surpass market expectations for its fourth-quarter 2024 EBITDA. These recent developments provide valuable insights for investors interested in Expand Energy's performance and prospects.
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