UBS initiates Magnolia Oil & Gas with Buy, sets $26 price target

Tuesday, UBS analysts began covering Magnolia Oil & Gas Corp. (NYSE:MGY) shares with a Buy rating and a price target of $26.00. The initiation comes as the firm sees a strong investment opportunity due to the company’s impressive capital returns and efficient operations.

According to UBS, Magnolia Oil & Gas is expected to return more than 80% of its free cash flow in 2025, showcasing significant capital efficiency. The company’s ability to increase production per share also contributes to the positive assessment from the analysts. UBS highlighted the company’s robust balance sheet, which they believe positions Magnolia Oil & Gas to sustain capital returns even if oil prices decline.

The analysts pointed out that the current share price, which has fallen over 25% from its 52-week high, presents an attractive entry point for investors. They regard Magnolia Oil & Gas as a small to mid-cap (SMID Cap) company that offers the defensive qualities typically found in larger caps, making it a high-quality investment choice in the sector.

UBS justified the $26 price target by noting that the market is currently undervaluing Magnolia Oil & Gas. The firm’s projections indicate that the company’s 2026 estimated EBITDA is more than 20% below what UBS believes it should be, suggesting significant upside potential for the stock.

The initiation of coverage by UBS reflects a strong confidence in Magnolia Oil & Gas’ future performance, underpinned by a solid financial foundation and the potential for high returns to shareholders.

In other recent news, Magnolia Oil & Gas Corporation announced a 15% increase in its quarterly dividend, marking the fourth consecutive year of dividend hikes. This decision, attributed to the company’s operational achievements in 2024, will see Class A shareholders and Class B unit holders receiving $0.15 per share and per unit, respectively, on March 3, 2025. On the analyst front, Goldman Sachs downgraded Magnolia’s stock rating from Buy to Neutral, lowering the price target to $26.00, citing limited catalysts for further stock performance enhancements. Mizuho (NYSE:MFG) Securities also adjusted its price target for Magnolia from $28.00 to $26.00, maintaining a Neutral rating as the company focuses on its 2025 financial strategy. Meanwhile, JPMorgan raised its price target from $26.00 to $28.00, reflecting Magnolia’s strong cash flow and steady operational outlook.

Benchmark analysts maintained a Hold rating on Magnolia, with their first-quarter financial estimates aligning closely with market consensus, suggesting a neutral outlook on short-term performance. Magnolia plans to maintain consistent operations with two rigs and one completion crew, focusing on the Giddings area, and anticipates mid-single-digit total production growth in 2025. The company aims to keep capital expenditures within 55% of its annual EBITDA, emphasizing fiscal discipline. These developments highlight Magnolia’s strategic focus on maintaining operational efficiency and shareholder returns amid fluctuating oil prices.

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