UPDATE: Citigroup Reiterates on Concho Resources as Growth Plan Execution Leads to Attractive Multiple Compression
In a report published Monday, Citigroup analyst John Nelson reiterated a Buy rating on Concho Resources (NYSE: CXO), and raised the price target from $120.00 to $130.00.
In the report, Citigroup noted, “Concho's recently announced 3 year growth plan strengthens our conviction in our prior investment thesis while execution risk associated with capital spending acceleration, in our view, is at least offset by higher expected returns. To underscore the latter, we project ~1.5 points of annual multiple compression in each '15 and '16 as cashflow growth is realized. Reiterate Concho as our Top Smid-Cap E&P Pick and raise our target price to $130 from $120. Concho introduced plans to grow production at a 25% CAGR (27.5% for oil) through 2016. In our opinion, the announcement is a high conviction signal of the depth of the firm's inventory, highlights the high cash generation of these assets (as well as the current production base) and reestablishes production growth expectations deserving of a multiple premium.”
Concho Resources closed on Friday at $110.90.
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