On Thursday, Piper Sandler adjusted its price target for ConocoPhillips (NYSE:NYSE:COP), a major player in the oil industry, reducing it to $133 from the previous $139. The firm, however, continues to recommend the stock with an Overweight rating.
The adjustment comes amidst a period described by the firm as a "golden age" for International Oil Companies (IOCs).
The analyst noted that the depth and quality of upstream resources vary significantly among these companies, which is expected to influence their capital efficiency and the ability to sustain growth in cash flow from operations and free cash flow. In this landscape, U.S. IOCs, particularly Exxon Mobil (NYSE:XOM) and ConocoPhillips, are seen as well-positioned for compounded success due to their portfolios.
The new price target is derived from a balanced approach, taking into account a free cash flow yield target based on the 2024 free cash flow at an oil price of $80 per barrel Brent, in relation to the S&P Index, and a forward valuation to EBITDA multiple of 7x, which has been increased from the previous 6.2x. This multiple is reportedly in line with those of large-cap exploration and production peers.
Furthermore, in determining the price target, Piper Sandler included ConocoPhillips' short-term investments, such as its equity stake in Cenovus Energy (NYSE:CVE) and similar holdings, as part of the company's cash position. This inclusion reflects a comprehensive assessment of the company's financial resources and potential for growth.
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