Callon Petroleum (CPE) Valuation Update - Nov 3

[dan_s]

CPE closed today at $46.53. First Call's price target is $60.77 and TipRanks' average price target is $59.00.

I have updated my forecast/valuation model for their very good Q3 results that beat my forecast and fresh guidance for Q4.

My valuation increases by $10 to $110.00/share.
Why?
> CPE is on pace to generate operating cash flow of more than $25/share this year and my 2023 forecast is $31.40 operating CFPS.
> My valuation is just 4X annualized operating CFPS for 2022 and 2023 with double weight on 2022.
> The balance sheet is in good shape, but they still have some work to do on the overall debt level.
> CPE is now back in "growth mode" which should draw more upgrades from the Wall Street Gang. < They are putting a 6th operated rig to work this quarter.

CPE was the best performing stock in the Sweet 16 in 2021 and is the worst performing stock this year. I expect it to reverse again and be near the top of the pack in 2023 because the per share numbers are just too good to ignore much longer.