Chesapeake Energy Corporation (NYSE:CHK) is marching steadily north on heavy volume after a series of analysts cite reasons why CHK stock isn’t done gaining yet.
Wunderlich upgraded the energy firm on Friday, increasing its price target on CHK stock to $10 from $6 previously, and upgraded the stock to a “buy” from “hold.” Wunderlich cited Chesapeake’s improved business in spite of the rout in the price of oil.
What’s more, SunTrust Robinson Humphrey explained why it’s so bullish on CHK stock and why it raised its price target from $8 to $11 — 36% upside from the current Chesapeake stock price.
SunTrust analysts Neal Dingmann and Raymond Leong expect Chesapeake to sell off a huge chunk of its assets before 2016 is out. The sale, the pair estimates, would push revenues over the $2 billion mark.
The duo went on to explain CHK’s improved financial position:
“Chesapeake does not get enough credit for its continued improved operational efficiencies that has seen well costs in nearly all six major regions fall materially while results improve … The economics on these natural gas wells are among the best in the US. We look for similarly strong well returns to continue to be announced in the Eagle Ford and Mid Continent among other regions.”
The analysts believe that CHK will have more power to focus on its operations:
“Given the ability to spend more next year and improved operating efficiencies, we increase our price target to $11 from $8 driven by our 2017 EBITDA estimate of $2.3B ($2.1B prior and $2.1B Street consensus) applied to price target multiple of 7.0x (6.9x prior and 10.2x peer group average).”
Today’s gains come after CHK stock gained 13%-plus Friday after announcing capital spending in 2016 of just $1.3 billion to $1.8 billion on top of a stronger-than-expected natural gas report from U.S. Energy Information Administration.
But with CHK stock now well above its 50-day moving average and veering into extremely overbought territory, some profit-taking should be expected soon.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
