On Wednesday, TD Cowen maintained its positive stance on Matador Resources Company (NYSE:), reiterating a Buy rating with a consistent price target of $84.00. The affirmation follows the company’s recent acquisition of Ameredev II, which, according to the firm, could lead to higher than previously expected production levels by fiscal year 2025.
The updated model from TD Cowen suggests that Matador Resources’ production volumes could surpass the Street’s expectations by 2%. The revised projections are also indicative of a potential increase in EBITDAX (earnings before interest, taxes, depreciation, amortization, and exploration expenses) and cash flow per share (CFPS). The initial estimates already pointed to a 13% and 9% accretion in EBITDAX and CFPS, respectively.
TD Cowen’s analysis highlighted the standalone performance of the newly acquired asset, Ameredev, noting that it is on track to meet the management’s near-term (NTM) EBITDA targets. The firm’s endorsement reflects a positive outlook on Matador Resources’ operational and financial trajectory following the strategic acquisition.
The acquisition appears to be a strategic move for Matador Resources, aiming to strengthen its production capabilities and financial metrics. With the analyst firm’s maintained Buy rating and price target, the market’s attention may stay focused on the company’s progress in integrating Ameredev II and realizing the anticipated financial benefits.
In other recent news, Matador Resources has made significant strides with its recent acquisition of Ameredev for $1.9 billion, enhancing its presence in the Delaware Basin. The acquisition, expected to close by the third quarter of 2024, includes a 19% interest in Piñon Midstream and is projected to be accretive to key financial metrics, with a forward one-year Adjusted EBITDA projection of $425 to $475 million.
Analyst firms Mizuho Securities, KeyBanc, BMO Capital Markets, and Truist Securities have all expressed confidence in the strategic move, with Mizuho lifting its price target to $85 and Truist to $91, and both maintaining a Buy rating on Matador’s stock. BMO Capital and KeyBanc have also maintained their positive ratings, with BMO projecting a 15% increase in cash flow per share and a 22% rise in free cash flow by 2025 due to the acquisition.
InvestingPro Insights
TD Cowen’s optimistic outlook on Matador Resources Company (NYSE:MTDR) is further substantiated by recent InvestingPro data, which sheds light on the company’s financial health and market performance. With a market capitalization of $7.37 billion and a strong P/E ratio of 8.11, Matador Resources stands out in the sector. Notably, the company has demonstrated a robust gross profit margin of 80.19% over the last twelve months as of Q1 2024, reflecting its efficiency in managing costs relative to revenue.
InvestingPro Tips also reveal that Matador Resources has been profitable over the past year and is expected to remain profitable this year, as per analysts’ predictions. Additionally, the company has been rewarding its investors with a consistent dividend, which has seen growth for three consecutive years, and a dividend yield of 1.35% as of mid-May 2024. These financial indicators are pivotal for investors considering the company’s long-term return potential, which has been strong over the past five years.
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