SM Energy (SM) Valuation Update - Feb 21

[dan_s]

SM closed today at $34.35, which is less than 2X my operating cash flow per share forecast of $20.47 for 2025. Adjusted operating cash flow in 2024 was $1,771.3 million, $15.48/share. SM pays a small dividend and the have an active stock buyback.

First Call's price target is $52.87

TipRanks: "In the last 3 months, 11 ranked analysts set 12-month price targets for SM. The average price target among the analysts is $53.80." < Four of the analysts (3 rated 5-Star by TipRanks) have updated their price targets since SM released Q4 results and guidance for 2025. Their price target are $45, $50, $56 and $65.

My current valuation is $80/share, which is just 4X annualized operating CFPS for 2024-2026.

SM closed an all cash $2.1 billion Unita Basin Acquisition on October 1, 2024 that added 44,000 Boepd of production (38,700 bpd of crude oil) and a lot of high-quality "Running Room".

Q4 production was 208,000 Boepd. My 2025 forecast is 211,650 Boepd (52% crude oil, 34% natural gas and 14% NGLs).

The Wall Street Gang is not keen on the Unita Basin, but they should be since it has a lot of recoverable oil in place.

SM is very profitable and it should generate over $1 billion of free cash flow from operations this year.

My updated forecast/valuation model has been posted to the EPG website.