Tuesday, Mizuho (NYSE:MFG) Securities reduced its price target on CNX Resources shares (NYSE: NYSE:CNX) to $34 from $38, while keeping an Underperform rating on the stock. The firm's analysts pointed out that CNX Resources' performance has lagged behind its gas sector peers significantly this year, with a year-to-date underperformance of approximately 30%.
This decline was attributed to the company not benefiting from expected additional revenue streams for its New Technology segment from 45V tax credits, following the Treasury's final rules published on January 8. According to InvestingPro data, the stock's technical indicators suggest it's currently in oversold territory, while maintaining a P/E ratio of 8.06x and showing a strong one-year return of nearly 50%.
CNX Resources has been facing a challenging market environment, but the outlook for natural gas is looking more favorable. The company is positioned with fewer hedges in 2025, which could potentially expose it to market prices more directly.
Additionally, CNX Resources has recently expanded its operational scale through the acquisition of Apex II. However, this expansion also resulted in an increase in the company's balance sheet leverage, which is a point of concern for investors.
InvestingPro analysis reveals a current ratio of 0.37, indicating potential liquidity challenges, though management has been actively buying back shares, showing confidence in the company's future prospects. Get access to 10+ additional exclusive ProTips and comprehensive financial analysis through InvestingPro's detailed research reports.
Despite the stock currently trading at a discount to its peers, Mizuho analysts suggest that investors should seek further clarity on the company's plans for capital spending in 2025, the depth of its natural gas reserves, and the outlook for the New Technology segment before reconsidering the stock's rating. The firm emphasizes that the company's execution and communication in the coming year will be pivotal in determining its future performance.
The revised price target is based on a net asset value (NAV) approach, reflecting the analysts' assessment of the intrinsic value of CNX Resources' underlying assets and their potential to generate revenue. The decrease in the price target suggests that Mizuho analysts have adjusted their valuation in light of the recent developments and the company's strategic decisions.
In other recent news, CNX Resources Corporation has been involved in several significant developments. The company has recently priced a $200 million debt offering to support its pending acquisition of Apex Energy and its affiliates.
Furthermore, CNX Resources has expressed concerns about the final rules for the Section 45V Hydrogen Production Tax Credit issued by the Treasury Department, stating they do not provide enough incentive for its hydrogen project. The company is exploring alternative incentives for its operations, including voluntary markets, alternative tax incentives, and compliance programs.
JPMorgan (NYSE:JPM) has revised the price target for CNX Resources from $37 to $33, maintaining an underweight rating on the stock. This adjustment follows a 19% decline in CNX shares since the beginning of the year. Despite this, JPMorgan analysts anticipate further details from CNX management regarding the potential to grow its new technology Free Cash Flow (FCF), including contributions from its AutoSep venture and the Compressed Natural Gas (CNG) business.
Additionally, CNX Resources has acquired all membership interests in three entities owned by Apex Upstream, LLC, and Apex WML, LLC, in a cash deal valued at $505 million. In contrast, Mizuho Securities has downgraded CNX Resources' stock from Neutral to Underperform, citing a cautious outlook on the company's new ventures. Truist Securities has adjusted its stance on CNX Resources shares twice, initially increasing the stock's price target following the announcement of the Apex Energy acquisition, but later downgrading the stock from Buy to Hold after CNX Resources' third-quarter financial results.
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