Piper Jaffray Upgrades SM Energy (SM) to Overweight Amid 'Transformational' Permian Basin Deal

August 15, 2016 7:38 AM EDT
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Price: $39.37 -2.91%

Rating Summary:
    19 Buy, 15 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 14 | Down: 11 | New: 8
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Simmons & Company upgrades SM Energy (NYSE: SM) from Neutral to Overweight and moves its price target from $38 to $50.

Analyst Pearce Hammond commented today: We are upgrading SM Energy (SM) to Overweight from Neutral due to their transformational Permian acquisition combined with an attractive valuation. One of the complaints against SM over the past few years was the depth of quality inventory which contributed to a below peer group cash flow multiple. We believe the recent Midland Basin acquisition provides the company ample inventory to start closing the valuation gap with peers. In addition, we see SM as a "self help" story (similar to what we have seen with QEP and WPX, both of which were very well received by investors) whereby the company is refashioning their asset portfolio. We expect SM to sell their non-operated Eagle Ford position which should provide capital for them to develop their Midland Basin assets. SM offers nearly 30% upside to our revised PT/NAV and trades at ~5.9x '17 EV/EBITDAX vs. peers (CRZO, QEP, WPX) at 8.6x.

For an analyst ratings summary and ratings history on SM Energy click here. For more ratings news on SM Energy click here.

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