On Friday, TD (TSX:TD) Cowen initiated coverage on Expand Energy (NASDAQ:EXE) stock with a Hold rating and set a price target of $108.00. The firm's analysts noted that Expand Energy's shares have risen by 18% over the last month, compared to a 2.25% increase for the XOP, an index tracking the oil and gas exploration sector.
According to InvestingPro data, the stock is trading near its 52-week high of $108.83, with an impressive six-month return of 33.21%. The RSI indicates the stock is currently in overbought territory.
TD Cowen highlighted the company's position as the largest natural gas producer in the United States, stating that gas pricing for 2025 is expected to exceed their measure of incentive economics. This suggests that the current pricing environment is likely to encourage further production and investment in the sector.
With a market capitalization of $24.91 billion, Expand Energy maintains a strong market presence, though InvestingPro analysis suggests the stock is trading above its Fair Value. Subscribers can access 15 additional ProTips and comprehensive valuation metrics at InvestingPro.
The analysts at TD Cowen also pointed out Expand Energy's clear path to reducing its debt. They mentioned that the company's shares currently imply a 9% free cash flow (FCF) at strip gas prices, which are the current prices of futures contracts for natural gas.
This reflects the market's expectations for the company's ability to generate cash after accounting for capital and operational expenditures. Financial data from InvestingPro shows the company operates with a moderate debt-to-equity ratio of 0.2 and maintains a healthy current ratio of 2.0, indicating strong liquidity.
The Hold rating indicates that TD Cowen believes Expand Energy's stock is currently valued appropriately, considering the potential risks and rewards. The price target of $108.00 represents the firm's forecast for the stock's future price, based on their analysis of the company's fundamentals and market conditions. The stock currently trades at a P/E ratio of 56.02, suggesting a premium valuation compared to industry peers.
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