On Wednesday, Liberty Oilfield Services (NYSE:LBRT) received an upgrade from Citi, shifting from a Neutral to a Buy rating. The firm also increased the price target for the company's stock to $32.00, up from the previous $24.00. The upgrade comes after Liberty Oilfield Services demonstrated strong performance in the oilfield services (OFS) sector over the past year, outpacing initial concerns about margin compression.
Citi's analysis indicates that the stock’s current valuation, at approximately 3.4 times its estimated 2025 earnings before interest, taxes, depreciation, and amortization (EBITDA), does not fully reflect an improving business outlook. The firm anticipates that the demand for natural gas, driven by expanding power and export needs, will lead to 20-35 hydraulic fracturing fleets returning to service in the coming years, reversing recent market declines.
Liberty Oilfield Services has distinguished itself from competitors through its investment in electric fracturing (efrac) technology, which has contributed to greater stability in its base operations. Additionally, the company's ventures into mobile power and gas logistics are expected to open new avenues for growth, not only within the oil and gas industry but also in broader applications during a time of power scarcity.
Citi projects that these strategic moves will enable Liberty Oilfield Services' EBITDA multiple to increase to around 4.5 times by 2025, which is the basis for the newly set $32 price target. This anticipated growth reflects the potential for the company to further capitalize on its investments and the expanding market for natural gas.
InvestingPro Insights
The recent upgrade of Liberty Oilfield Services (NYSE:LBRT) by Citi to a Buy rating is echoed by the company's robust financial health and market performance. According to InvestingPro data, LBRT boasts a market capitalization of $3.98 billion and trades with a compelling price-to-earnings (P/E) ratio of 8.49, suggesting that the company's stock might be undervalued relative to its earnings. Additionally, LBRT's low price volatility could be an attractive feature for investors seeking stability in their portfolio.
InvestingPro Tips highlight that LBRT's cash flows can sufficiently cover interest payments, and the firm operates with a moderate level of debt, underpinning its financial resilience. Moreover, analysts are optimistic about the company's profitability, projecting it to be profitable this year. This aligns with Citi's positive outlook on LBRT's business expansion and technological investment strategies.
For readers interested in deeper analysis, there are 6 additional InvestingPro Tips available that could provide further insights into LBRT's performance and potential. To explore these tips and make more informed investment decisions, consider subscribing to InvestingPro using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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