One trend that we have started to see at the investment banks that we cover here at 24/7 Wall St. is a move down the capitalization ladder in the energy sector, and with good reason. Many of the larger, more liquid integrateds were the first place that money started to go as people crept back into energy, and most have run very hard, which has been great for shareholders, but some have become fully valued or close to it.
In new research reports from Stifel, they raise price target on three stocks that we continue to see more and more interest directed to on Wall Street. They are smaller cap companies that have outstanding upside potential, and all three are rated Buy at Stifel.
This company is one of the favorites around Wall Street among the smaller more nimble companies. Gulfport Energy Corp. (NASDAQ: GPOR) is an independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of eastern Ohio and along the Louisiana Gulf Coast. In addition, Gulfport holds a sizable acreage position in the Alberta Oil Sands in Canada through its 24.9% interest in Grizzly Oil Sands.
Gulfport is a favorite of hedge fund managers. In fact, according to Insider Monkey, 36 hedge funds owned positions in the stock late last year. The shares hit some weakness on gas prices and a lower growth outlook, a move lower many believe is overdone and recent stock movement seems to have confirmed. With a multiple in line with peers and an expected ramp-up in production this year, the stock may be a great value at current levels, despite the recent big rally.
The Stifel price target was raised to $36 from $32, and the Thomson/First Call consensus target is $34.43. The stock closed Wednesday at $32.50.
This company has one of the best production mixes of the stocks rated Buy, with 45% oil and 37% natural gas, and the balance in natural gas liquids (NGLs). Newfield Exploration Co. (NYSE: NFX) is an independent energy company engaged in exploration, development and production of crude oil, natural gas and NGLs. It is focused on North American resource plays, and the company’s principal areas of operation include the Mid-Continent, the Rocky Mountains and onshore Texas. In addition, Newfield has oil developments offshore China.
One very positive sign for shareholders and potential investors is that earnings estimates for the company have continue to be pushed higher recently. In fact, over the past month analysts have pushed not only the second quarter numbers higher, but the full year 2016 numbers have been raised as well.
The Stifel price target went from $40 to $44, while the consensus target is $43.66. The stock closed Wednesday at $40.42.
This company recently has started to catch some upgrades around Wall Street. Rice Energy Inc. (NASDAQ: RICE) an independent natural gas and oil company, is engaged in the acquisition, exploration and development of natural gas, oil and NGL properties in the Appalachian Basin. The company operates through two segments: Exploration and Production, and Midstream.
As of December 31, 2014, it held approximately 86,000 net acres in the southwestern core of the Marcellus Shale, Pennsylvania, and approximately 55,000 net acres in the southeastern core of the Utica Shale located in Belmont County, Ohio.
Some on Wall Street see the company as a very solid takeover candidate and see the potential for 20% or more growth over the next few years. Analysts have also cited that the midstream asset portfolio provides balance sheet flexibility, and they think that a capital outspend will be required through 2017 to achieve 20% growth.
The Stifel price target was raised to $22 from $20, and the consensus price objective is $22.48. Shares closed Wednesday at $21.55.
Given the potential for market volatility this summer, and that the spot price and stocks have run big, it may be wise for investors to initiate smaller partial positions now and look for a pullback to be more aggressive in adding shares.