SM Energy (SM) Price Target - Aug 30

[dan_s]

SM Energy Company
Note below from Scott Hanold at RBC Capital Markets

Post-2Q23 Update; Building Momentum

Rating: Sector Perform raising price target by $5 to $46. < Compares to my current valuation of $56, which is only 4X annualized operating CFPS

Our view: SM delivered a relatively robust operational and financial performance
that appears to have some momentum into 2H23. SM is now benefiting from
improved infrastructure in the South Texas Austin Chalk along with increasing
Permian completions. FCF should accelerate in 2H23 due to tapering capital
spending. Management continues to see stock buybacks as the optimal outlet for
incremental FCF given a view of intrinsic value, although it is worth noting that SM
shares have appreciated ~15% this month. We raise our price target by $5/share
to $46.
----------------------------
Scott Hanold is one of the best energy sector analysts and I consider RBC Capital's Energy Sector team to be Top Tier with Raymond James and Truist Financial. SM's balance sheet is now in good shape and should be in great shape by year end. I expect their year-end reserve report to show a PV10 Net
Asset Value near my current valuation.