UBS cuts Diamondback Energy price target to $163, maintains Buy

On Thursday, UBS analysts revised their price target for Diamondback Energy (NASDAQ:FANG) shares, lowering it to $163 from the previous $175, while continuing to endorse the stock with a Buy rating. The adjustment follows Diamondback Energy’s release of an operational update for the first quarter of 2025 after the market closed, which reported oil volumes exceeding the high end of their guidance. However, the company’s production of gas and natural liquids (NGL) did not meet expectations. According to InvestingPro data, the stock is currently trading at an attractive P/E ratio of 8.76x, with analysts maintaining a strong consensus recommendation of 1.63 (Buy).

Despite the mixed production results, UBS analysts remain optimistic about Diamondback Energy’s prospects. They highlight the company’s resilience against broader macroeconomic concerns affecting the oil sector, citing its favorable free cash flow (FCF) breakeven point and production-to-capital expenditure ratio. These factors are believed to support a stable FCF outlook for the firm. InvestingPro data shows the company maintains strong profitability with a 75.7% gross margin and has generated $1.9 billion in levered free cash flow over the last twelve months.

The analysts also noted the approximately 20% year-to-date decline in Diamondback Energy’s stock price as an attractive opportunity for investors seeking long-term oil exposure. They argue that the current valuation presents a compelling entry point, especially considering the potential for an oil market recovery. Diamondback Energy’s focus on the Permian Basin and its operational capabilities are seen as key strengths that could drive future performance. InvestingPro analysis reveals the company has maintained dividend payments for 8 consecutive years, currently offering a 5% yield, and maintains a "GOOD" overall financial health score.Want to dive deeper? Get access to 8+ additional InvestingPro Tips and a comprehensive Pro Research Report covering Diamondback Energy’s complete financial picture.

In their analysis, UBS points to Diamondback Energy’s leading position in the Permian Basin, which is one of the most prolific oil-producing regions in the United States. This strategic focus, combined with the company’s operational efficiency, is expected to underpin its ability to generate strong free cash flow even amidst fluctuating oil prices.

Investors and market watchers will be paying close attention to Diamondback Energy’s forthcoming first-quarter 2025 results, which will provide further insight into the company’s financial health and operational success. The UBS analysts’ reiteration of a Buy rating suggests confidence in Diamondback Energy’s ability to navigate the current oil market landscape and capitalize on its strategic advantages.

In other recent news, Viper Energy (NASDAQ:VNOM) released its first-quarter 2025 financial results, reporting an average production of 31,311 barrels of oil per day and 57,367 barrels of oil equivalent per day. The company realized hedging gains of $9.1 million and has repurchased 176,771 shares of its common stock for approximately $6.6 million. Additionally, Viper Energy has $427.6 million remaining in its share buyback authorization. Meanwhile, Diamondback Energy, the parent company of Viper Energy, has been the focus of several analyst updates. Mizuho (NYSE:MFG) Securities lowered its price target for Diamondback Energy to $194 but maintained an Outperform rating, noting the company’s strong financial position and potential for share buybacks. Citi upgraded Diamondback Energy’s stock to Buy, raising the price target to $180, citing operational efficiency and strategic initiatives. CFRA further raised its rating to Strong Buy, setting a new price target of $204, based on various valuation models and expected improvements in natural gas takeaway capacity. In another development, Diamondback Energy completed a $1.2 billion issuance of senior notes, maturing in 2035, to potentially enhance its strategic flexibility and capital structure.

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