Stockchase Opinions

Joe Terranova Diamondback Energy FANG-Q BUY Jun 24, 2024

He's tired of waiting for energy (WTI) to break out of its range of $65-90, but maybe it finally will. 

$198.040

Stock price when the opinion was issued

0
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BUY ON WEAKNESS
Run by an excellent CEO, and pays a fine CEO. Shares were up a lot today, 4.25%. Otherwise, he would say buy.
BUY

Just bought it. The energy in pullback was overdone. FANG offers secular growth, making good, strategic acquisitions and want to distribute 75% of their cash flow to investors through dividends and buybacks, plus a variable dividend. She bought around $139. China is not yet reflected in energy stocks, and today Russia announced energy output cuts.

BUY

Has a 11% free cash flow yield. WTI is about to hit its 50-day moving average at $83. Sell the March $160 calls; 5 months out you get 5% income and 15% total return if it gets called away.

DON'T BUY

Shares jumped 9.38% on news that they will buy Endeavor for $26 billion. Other oil mergers didn't move the buying company's stock anything like this, so today's rally was a result of animal spirts gone wild in the market.

BUY ON WEAKNESS

They just bought a $26 billion company taht strengthens their position in the Permian Basin. It's one of the strongest fundamental energy companies. Buy on pullback.

BUY

Energy stocks continue to pay down debt alot and generate a lot of free cash flow. FANG is one of the best int his space. She expects 14% and 22% revenue and earnings growth. Is up over 20% this year.

BUY

Their deal with Endeavor will close in Q3 and be strong for FANG. Is a top energy name.

BUY

Bought more. Great management and M&A strategy, which will add to earnings regardless of the oil price. Likes their cost control and cash flow.

HOLD
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

FANG is $42B market cap now, down 13% YTD and down 29% in a year, trading at 10.4X earnings with a 2.80% dividend (raised 11% in February). The balance sheet has some debt, but not a concerning amount. The sector is no one's favourite right now, with weakening oil prices. But we note the valuation reflects this, its last quarter was good, and estimates have been moving higher recently. Still, consensus calls for lower earnings this year and lower earnings next year. Thus it is hard to get too excited on it right now. We think its time will come, but we need to see better commodity pricing (preferred) or at least better investor sentiment. We would rate it a HOLD for now.
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