What the bad jobs report means for markets
On Wednesday, Raymond (NSE:RYMD) James adjusted its price target for Diamondback Energy (NASDAQ:FANG), reducing it to $214.00 from the previous $245.00, while still upholding a Strong Buy rating on the stock. Currently trading at $144.65, the stock sits near its 52-week low of $137.09. The adjustment follows a review of Diamondback’s recent earnings and a decline in oil prices. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis, with analysts maintaining a strong bullish consensus. Despite the lowered price target, the firm’s analyst acknowledged Diamondback Energy’s performance, which surpassed expectations in fourth-quarter earnings and cash flow by 9% and 2%, respectively. The company’s production exceeded estimates, and capital expenditures were approximately 7% lower than anticipated.
The firm’s full-year 2025 guidance suggests oil volumes are on par with market expectations, with a 5% reduction in projected capital expenditures. The analyst foresees an increase in drilling activities in 2026 due to the year-over-year impact of drilled but uncompleted wells (DUCs). With a P/E ratio of 9.31x and impressive revenue growth of 32.69% in the last twelve months, the company’s current valuation is based on an estimated free cash flow to enterprise value yield of around 9%, while trading at roughly 5 times its 2025 enterprise value to EBITDA. The stock also offers an attractive dividend yield of 4.5%.
Diamondback Energy, with its substantial market capitalization of $41.87 billion, is anticipated to benefit from several near-term catalysts, including pending non-core asset sales and a potential joint venture in power. InvestingPro analysis shows the company maintains a GOOD overall financial health score of 2.6, suggesting strong fundamentals to support these strategic moves. The report also highlighted the upcoming closure of the Double Eagle acquisition, expected at the beginning of the second quarter. This deal is consistent with Diamondback’s successful history of driving synergies from acquisitions. The limited opportunities remaining in the Midland Basin for acquiring quality acreage were also noted, emphasizing that opportunities such as Double Eagle are rare and cannot be timed.
The analyst also pointed out Diamondback’s continued improvements in capital efficiency. The company has managed to lower well costs to between $555 and $600 per foot in the Midland Basin. Innovations like SimulFracs and clear fluid drilling have contributed significantly to these cost reductions. In 2025, Diamondback plans to drill approximately 460 wells and complete around 575 wells, with the use of DUCs strategically reducing capital expenditures for the year. For deeper insights into Diamondback’s operational efficiency and comprehensive financial analysis, check out the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks with expert analysis and actionable intelligence.
In other recent news, Diamondback Energy reported impressive fourth-quarter 2024 earnings, with earnings per share (EPS) of $3.64, surpassing the forecasted $3.45, and revenue reaching $3.71 billion, exceeding the anticipated $3.55 billion. The company announced a $1.2 billion senior notes offering, with proceeds intended for general corporate purposes, including funding the acquisition of subsidiaries from Double Eagle IV Midco, LLC. JPMorgan has increased its price target for Diamondback Energy to $212, maintaining an Overweight rating, reflecting a positive outlook on the company’s financial performance. UBS also maintained a Buy rating with a price target of $216, noting Diamondback’s strong fourth-quarter results and lower-than-expected cash unit costs. TD Cowen reiterated its Buy rating with a $225 price target, highlighting Diamondback’s production efficiency and cost management. These developments indicate continued investor confidence in Diamondback Energy’s strategic moves and financial health.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.