- Comstock Resources (CRK -7.7%) tumbles after Piper Sandler downgrades shares to Neutral from Overweight with a $6 price target, cut from $6.50, citing its below-average free cash flow and higher leverage.
- The firm also cuts Cabot Oil & Gas (COG +0.8%) to Neutral with a $20 target on valuation concerns, but Cabot shares are trading higher.
- The February freeze drove natural gas markets into chaos but otherwise, the earnings season for the gas E&Ps came in according to expectations, and the companies are capitalizing on favorable commodity prices and efficiency gains to generate free cash flow and de-lever, Piper Sandler's Kathy Harrison says.
- But the analyst says Comstock has a less-favorable risk profile compared with peers, as FCF/EV resides below the average while leverage is above the group.
- Harrison says she cut Cabot because of valuation and the lack of company-specific catalysts beyond the recent capital return framework update.
- CNX Resources (CNX -2.7%) as the analyst's favorite gas idea due to its attractive medium-term margins and free cash flow.
- Comstock Resources boasts the lowest costs for a dry gas producer in the industry among major producers, Long Player writes in a bullish analysis posted recently on Seeking Alpha.