’Fasten your seatbelts’— BTIG strategists warn of coming turbulence
On Monday, BofA Securities initiated coverage on Matador Resources Company (NYSE:MTDR), an oil exploration and production company with primary operations in New Mexico’s Eddy and Lea counties. The firm issued a Buy rating on the stock, accompanied by a price target of $56.00. According to InvestingPro analysis, the company appears undervalued based on its Fair Value model, despite trading at a relatively high P/E ratio of 6x and maintaining a market capitalization of $5.58 billion.
The BofA Securities analyst highlighted several factors that contribute to the positive outlook on Matador Resources. Among these are the company’s diverse growth strategies, which include developing its low breakeven assets, share repurchases, expanding its midstream operations, and pursuing inorganic growth opportunities. The breakeven costs for Matador’s assets are notably competitive, ranging between $37 and $43 per barrel of West Texas Intermediate (WTI) crude oil. The company’s strong execution is reflected in its impressive 21.7% revenue growth over the last twelve months.
In addition to the growth strategies, the analyst underscored the strength of Matador Resources’ management team. This experienced team is seen as a key advantage for the company, particularly in navigating the current challenging macroeconomic environment. Financial metrics support this view, with the company achieving a return on equity of 19% and return on assets of 10.6%. Discover more detailed insights and metrics with InvestingPro, which offers comprehensive analysis through its Pro Research Report, available for over 1,400 US stocks.
The analyst’s commentary provided a clear rationale for the Buy rating, stating, "We initiate coverage of Matador Resources (MTDR), a mid-cap oil-focused E&P with operations primarily in New Mexico’s Eddy and Lea counties, with a Buy rating and a PO of $56. In our view, the company has diverse growth options that set it apart from other E&Ps."
The endorsement from BofA Securities comes despite a weak macro backdrop, suggesting confidence in Matador Resources’ ability to perform well even in less favorable economic conditions. The company’s strategy and management are seen as differentiating factors that could drive its success in the sector.
In other recent news, Matador Resources Company reported its first-quarter 2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $1.99, compared to the forecasted $1.84. However, the company experienced a shortfall in revenue, posting $909.9 million against a forecast of $959.65 million. Despite the earnings beat, the company’s stock price saw a slight decline in after-hours trading. Fitch Ratings recently upgraded Matador Resources’ Long-Term Issuer Default Ratings from ’BB-’ to ’BB’, citing successful debt reduction initiatives following acquisitions and expectations of positive Free Cash Flow generation. The company has managed to lower its gross debt by over $700 million since the Ameredev transaction in Q3 2024. Fitch anticipates Matador’s production to reach approximately 200,000 barrels of oil equivalent per day in 2025, supported by an eight-rig drilling program. Additionally, Matador Resources has authorized a $400 million share buyback and is considering the possibility of a midstream IPO. The company is also projecting a 17% increase in oil production by the end of the year.
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