UPDATE: J.P. Morgan Downgrades Chesapeake Energy Corporation to Neutral, Reiterates $20 PT on Valuation, Funding Gap, Lack of Catalysts

In a report published Thursday, J.P. Morgan analyst Joseph Allman downgraded the rating on Chesapeake Energy Corporation CHK from Overweight to Neutral, but reiterated the $20.00 price target. In the report, Allman noted, “For CHK, the Era of Reckless Spending is over, in our view. But the market likely now knows that Chesapeake will be a more disciplined company in the future. Stock price performance relative to its peers probably relies on the result of asset sales as much as anything else. And we have no visibility on the company executing better-than-expected asset sales. Although CHK has managed to reduce spending and costs successfully, we model the company outspending cash flow in 2013, 2014, and 2015. We believe its planned asset sales will help CHK fund its cash outspend in 2013 but CHK has another funding gap in 2014 and 2015, according to our model. We think the stock is relatively fairly valued. Our Neutral rating reflects valuation, lack of visible catalysts and the company's persistent funding gap.” Chesapeake Energy Corporation closed on Wednesday at $20.66.