William Blair analyst Neal Dingmann has maintained their neutral stance on CIVI stock, giving a Hold rating yesterday.
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Neal Dingmann has given his Hold rating due to a combination of factors influencing Civitas Resources. The company is exploring a potential sale, which aligns with its recent strategic shifts, including a change in leadership and shareholder return strategy. Despite this, Civitas trades at a moderate discount compared to its peers, which could make it an attractive acquisition target for larger companies, particularly those in the Permian region. However, the company’s higher leverage compared to its peers limits the pool of potential acquirers, as many are focused on maintaining strong balance sheets.
Additionally, while Civitas’s assets in the Permian and DJ basins could be appealing, they might also deter some potential buyers unless the DJ assets are sold separately. The company’s financial metrics, such as a 2.3x EV/EBITDAX multiple and a 13% free cash flow yield, suggest some upside potential, but the risks associated with commodity prices, costs, and inventory replacement could impact future valuations. Therefore, Neal Dingmann’s Hold rating reflects a balanced view of these opportunities and risks, suggesting limited immediate upside potential for the stock.
In another report released yesterday, Roth MKM also maintained a Hold rating on the stock with a $30.00 price target.