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On Monday, Raymond (NSE:RYMD) James maintained an Outperform rating on SM Energy (NYSE:SM), but reduced its price target from $59.00 to $40.00. The adjustment follows the release of fourth-quarter 2024 results and a notable decline in oil prices. The stock currently trades at $27.59, near its 52-week low of $26.66, with InvestingPro data showing technical indicators suggesting oversold conditions. Analysts at Raymond James have updated their estimates to reflect recent market trends and company performance.
SM Energy’s first-quarter 2025 production is projected to be 195 thousand barrels of oil equivalent per day (MBoe/d), aligning with the company’s guidance. This represents a roughly 7% quarter-over-quarter decrease, attributed to the timing of turn-in-lines (TILs) and the decision to drop a fracturing crew in South Texas. The total capital expenditure for the first quarter is estimated to be approximately $428 million, consistent with the latest guidance from the company. Despite recent challenges, the company maintains strong profitability with an impressive 81% gross margin and 20% return on equity.
For the full year 2025, Raymond James anticipates SM Energy will produce around 208 MBoe/d, with capital expenditures close to $1.3 billion, both estimates being in line with expectations. Despite the lowered price target, the firm highlighted SM Energy’s free cash flow (FCF) yield at about 10% and an enterprise value to EBITDA (EV/EBITDA) multiple of 2.7 times.
The reduction in the price target to $40 is primarily driven by the significantly weaker oil price environment since the last publication. Nonetheless, the Outperform rating suggests that Raymond James continues to view SM Energy favorably in terms of future performance despite the current challenges in the oil market.
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