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On Monday, Roth/MKM maintained its Neutral rating and $10.00 stock price target for Comstock Resources (NYSE:CRK), citing several concerns such as the company's significant exposure to natural gas price risks, higher leverage compared to its peers, and historical execution challenges. The firm anticipates that Comstock Resources will be one of the few exploration and production companies to spend more than its cash flow in both 2024 and 2025.
Despite these concerns, a positive market reaction is expected for Comstock Resources compared to its peers. This outlook follows the news that Jerry Jones, the company's majority shareholder, made an additional investment in the company. On August 16, Jones purchased 573,433 Comstock Resources shares on the open market, amounting to $6.1 million, at an average price of $10.64 per share.
The purchase by Jerry Jones aligns with the market's closing price of $10.65 on the day of the announcement. His latest acquisition increases his ownership to approximately 203.5 million shares, representing about 70% of Comstock Resources. This significant stake by Jones is a notable factor in the company's shareholder structure.
The firm's assessment reflects a cautious stance on Comstock Resources, taking into account the broader industry challenges and the company's specific financial and operational situation. The reiterated Neutral rating and price target suggest that the firm sees limited upside potential for the stock at this time, given the risks outlined.
The market's reaction to Jones' additional share purchase and the firm's rating will be closely watched by investors, as it may influence the stock's performance in the near term. Comstock Resources' financial strategy and market movements will continue to be areas of focus for those following the energy sector.
In other recent news, Comstock Resources has been the subject of several recent developments. The company's second-quarter earnings missed expectations primarily due to lower-than-anticipated gas volumes, resulting in an adjusted net loss of $0.20 per share. Nonetheless, Comstock reported a modest 4% year-over-year increase in production and remains optimistic about future prospects, citing its strong management team and financial liquidity.
In the wake of these results, Piper Sandler downgraded Comstock from Neutral to Underweight, largely due to a decrease in the long-term natural gas price assumption. The firm also reduced the stock's price target to $5.00, down from the previous $8.00. Piper Sandler has also decreased its capital expenditure estimate for the fiscal year 2025 to approximately $700 million, leading to a projected 9% drop in production forecasts for 2025.
Despite these challenges, Comstock continues to advance its operations in the Western Haynesville, with plans to turn new wells in line during the fourth quarter of 2024.
The company has also provided third-quarter 2024 production guidance with a midpoint of 1.45 billion cubic feet equivalent per day, keeping its full-year 2024 guidance steady. These developments represent the latest efforts by Comstock to navigate the challenging natural gas market and position itself for potential future growth.
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