Citi has maintained its Buy rating on Talos Energy (NYSE: NYSE:TALO) but reduced the stock's price target to $12.50 from the previous $14.50.
The adjustment comes as the analyst revised the company's earnings model, which now predicts discretionary cash flow of approximately $215.5 million, contrasting with the consensus estimate of about $256.7 million for the quarter.
Talos Energy's production is expected to be on the lower end of the spectrum, and capital expenditures for the quarter are anticipated to decrease slightly due to project timing. However, the shortfall is projected to be recouped in the fourth quarter.
The upcoming earnings call is expected to address not just the company's operational pace in future quarters but also the ongoing CEO search and potential strategic shifts with the existing poison-pill strategy.
In other recent news, Talos Energy has reported record-breaking second quarter results for 2024, with oil output reaching 955,000 barrels per day and an adjusted EBITDA of $344 million. The company also repaid $100 million in debt and repurchased 3.8 million shares, demonstrating a commitment to shareholder value.
Talos Energy has made significant strides with a major oil and gas discovery at its Ewing Bank 953 well in the U.S. Gulf of Mexico, with estimates indicating a gross recoverable resource potential between 15 and 25 million barrels of oil equivalent.
Furthermore, Mizuho initiated coverage on Talos Energy with an Outperform rating, emphasizing the company's strategic approach and strong cash flow. Goldman Sachs has also maintained a Buy rating for Talos Energy, citing the company's strong financial performance and successful acquisitions of QuarterNorth and Monument.
In leadership news, Joseph A. Mills has been appointed as the interim President and CEO, following Tim Duncan's resignation. The company has revised its revenue forecast from $30 million to $35 million and increased its synergy forecast from $55 million to $65 million.
InvestingPro Insights
Recent InvestingPro data provides additional context to Citi's analysis of Talos Energy (NYSE:TALO). The company's market capitalization stands at $1.94 billion, with a price-to-book ratio of 0.71, suggesting the stock might be undervalued relative to its book value. This aligns with Citi's maintained Buy rating, despite the lowered price target.
InvestingPro Tips highlight that Talos Energy's stock price movements are quite volatile, which investors should consider in light of the current macroeconomic uncertainty mentioned in the article. Additionally, the company's revenue growth of 24.09% over the last twelve months and a strong quarterly revenue growth of 49.67% in Q2 2024 indicate positive operational performance, potentially supporting Citi's optimistic outlook.
However, it's worth noting that Talos Energy was not profitable over the last twelve months, with a negative P/E ratio. This could explain the analyst's revised earnings model and the reduced price target. Investors seeking more comprehensive analysis can find 5 additional InvestingPro Tips for Talos Energy, offering deeper insights into the company's financial health and market position.
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