On Wednesday, Mizuho Securities adjusted its outlook on Antero Resources (NYSE:AR), raising the stock's price target to $29.00 from the previous $28.00, while maintaining a Neutral stance on the shares.
The revision comes after an analysis that anticipates a roughly 8% shortfall in EBITDA and a cash overspend for the first quarter of 2024. The firm's total production volumes are expected to fall about 1% short of current market expectations, yet align closely with the midpoint of the company's full-year 2024 guidance range of 3.3 to 3.4 billion cubic feet equivalent per day (bcfe/d).
Mizuho highlighted that a minor increase in ethane volumes and better natural gas liquids (NGL) pricing could not fully counterbalance the impact of lower commodity prices and slightly elevated costs, including ad valorem taxes and gathering and processing expenses.
These factors contribute to the projection that Antero Resources will achieve merely a cash-flow breakeven point in 2024, based on current Nymex gas futures pricing. Consequently, this may constrain the company's ability to return cash to shareholders through buyback programs within the year.
The analysis also noted that, despite stronger trends in good productivity and operational efficiency, Antero Resources' financial flexibility is likely to be limited. The company is expected to concentrate on the macroeconomic outlook for natural gas and NGLs. The natural gas market dynamics are anticipated to be influenced by expansions in U.S. LNG export capacity and potential demand from power generation sectors, including those driven by AI and data centers.
The report also suggested that given the recent trend of industry consolidation, exemplified by the EQT (ST:EQTAB) and ETRN merger, there is interest in management's perspective on mergers and acquisitions. The upward adjustment in Antero Resources' price target to $29 is based on a net asset value (NAV) approach, as per Mizuho's assessment. The firm reiterated its Neutral rating on the stock.
InvestingPro Insights
In light of Mizuho Securities' recent adjustment of Antero Resources' price target, real-time data and InvestingPro Tips provide additional context for investors. Antero Resources is currently trading at a high earnings multiple with a P/E ratio of 36.14, and analysts have revised their earnings upwards for the upcoming period, underscoring potential confidence in the company's performance. The stock's price movements have been quite volatile, which could be a consideration for investors with a lower risk tolerance.
InvestingPro Data indicates that Antero Resources has a market capitalization of $8.96 billion and a revenue of $4.485 billion over the last twelve months as of Q4 2023. Despite a notable decrease in revenue growth during the same period, the company maintains a strong gross profit margin of 64.74%. It's also worth noting that the stock is trading near its 52-week high, at 95.5% of this peak, which may signal a positive market sentiment.
For those interested in further analysis, there are additional InvestingPro Tips available, which could help in making a more informed decision. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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