Diamondback Energy (FANG) Valuation Update - Aug 1

[dan_s]

At the time of this post FANG was trading for $148.02.

I have updated my forecast/valuation model for the Company's solid Q2 results, despite lower realized natural gas and NGL prices. The vast majority of FANG's revenues (88%) are from oil sales.

My current valuation increases by $5 to $178/share, primarily due to the increase in their production guidance.

TipRanks: "In the last 3 months, 14 ranked analysts set 12-month price targets for FANG. The average price target among the analysts is $168.79. Three of the analysts submitted new price targets this morning that are $140, $207 and $185." Bank of America putting a SELL on it makes no sense to me. They must be the lone member of the Wall Street Gang that believes oil prices are heading back down.

I will be moving FANG back to the Sweet 16 since they have gone back to paying just a base dividend of $0.84 per quarter. In 2022 the Company paid out $11.31 in total dividends. They are now using free cash flow to aggressively buyback common stock. Rising oil prices, increasing production and declining common stock is a good recipe for a higher share price.