Street Calls of the Week
Investing.com - Mizuho has lowered its price target on SM Energy (NYSE:SM) to $38.00 from $39.00 while maintaining an Outperform rating on the stock. Currently trading at $24.33, the stock has experienced significant volatility this year, with a YTD decline of 35.87%. According to InvestingPro analysis, SM Energy shows signs of being undervalued despite maintaining strong profitability metrics.
The firm cited weaker gas and natural gas liquids (NGL) realizations as offsetting higher oil volumes in its third-quarter 2025 cash flow and EBITDX forecasts, which remain in line with consensus estimates.
Mizuho noted that investor focus will be on SM Energy’s 2026 commentary, particularly regarding the company’s ability to deliver relatively flat year-over-year volumes with lower capital expenditures, as well as updates on cash returns as SM approaches its 1.0x leverage target.
The research note also addressed recent Bloomberg reports that SM Energy and Civitas Resources may be considering a merger of equals, describing SM as a "solid operator" willing to enter new basins such as Uinta, which could support a potential combination.
Mizuho pointed out that both companies’ shares have underperformed year-to-date, with both firms currently undergoing CEO and COO transitions, factors that may influence investor sentiment regarding any potential merger activity.
In other recent news, SM Energy’s earnings call for the second quarter of 2025 emphasized the company’s strategic focus on reducing leverage, enhancing operational efficiency, and improving market positioning. During the call, SM Energy reiterated its commitment to optimizing its asset base and maximizing free cash flow. These efforts come amidst a dynamic market environment, aiming to bolster the company’s financial health and investor confidence. Although the company’s stock showed a slight decline during regular trading hours, a modest uptick in premarket trading suggested positive investor sentiment towards future prospects. The earnings call did not provide specific financial figures, but the strategic initiatives highlighted are crucial for investors monitoring the company’s performance. The focus on operational efficiency and leverage reduction indicates a proactive approach to navigating current market conditions. These developments are part of SM Energy’s broader strategy to enhance its market standing and financial stability.
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