UPDATE: Goldman Sachs Starts ChampionX (CHX) at Sell

(Updated - September 20, 2021 4:14 AM EDT)

Goldman Sachs analyst Neil Mehta initiates coverage on ChampionX (NASDAQ: CHX) with a Sell rating and a price target of $22.00.

The analyst comments "We believe that CHX's relatively stable cash flow profile supported by global oil production volumes provides investors with resilience through cycles. We also believe that CHX should be able to achieve its deleveraging target of 1.0x net debt/EBITDA by the end of this year and potentially initiate a dividend in 2022. ChampionX is also taking the right steps to incorporate products in its portfolio to support oilfield customer ESG objectives. However, our EBITDA estimates for CHX are 2-3% below FactSet consensus for '22-'26, driven primarily by a slower growth in production chemical revenue vs consensus. As such, we view CHX's current implied 2022 EV/EBITDA multiple of ~8.8x as relatively high for the ~4% CAGR EBITDA growth it offers between 2023 and 2026 compared to the ~9% offered by other traditional oilfield service names in our coverage. Additionally, CHX generates ~60-65% of its revenue from the North American markets where we believe production volume growth is likely to be muted in comparison to the Middle East, where the company generates ~16-17% of its revenue. Lastly, while we believe that ChampionX's production focused revenue generation is a strength for the company, we prefer names that stand to benefit from drilling and completion activity increases in the near term due to operating leverage driven EBITDA growth."

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

Shares of ChampionX closed at $23.26 yesterday.

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