How Weak Sentiment On Gulfport Energy Led One Firm To Upgrade It To Buy

Goldman Sachs’ John Nelson believes that Gulfport Energy Corporation GPOR shares are pricing in “an extended operational disruption despite inflecting operational momentum.”

Nelson upgraded the company to Buy, with a price target of $35.

Weak Sentiment

The analyst believes a majority of the investor pushback is “stale” and more than adequately reflected in the stock valuation.

Nelson also believes that the risk-reward profile is compelling at present, since the stock is trading at a discount to the low end of its historical forward EBITDA range.

“We anticipate details provided alongside 3Q16 results will show operational momentum is accelerating, which should support improving investor sentiment/valuation,” the analyst stated.

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Nelson also mentioned that conversations with investors suggest that following an increase in E&P equity prices over the past month, the Street is now using a higher oil price and U.S. production growth expectations.

Investor Concerns

With regard to the current discounted valuation, the analyst explained that “investors highlighted a lack of confidence in operational execution, concerns over the firm’s Utica type curves and the potential need for future acquisitions to expand inventory.”

Following the revised Atlantic Sunrise FRC schedule, some investors also expressed concern regarding pipeline delays pressuring local market natural gas prices.

However, the analyst believes the 2018 production estimate was skewed to the upside, given the meaningful expansion of pipeline capacity expected during Q4:17/Q1:18.

At last check, Gulfport Energy was down 1.77 percent at $26.04.

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Posted In: Analyst ColorLong IdeasNewsUpgradesPrice TargetCommoditiesMarketsAnalyst RatingsMoversTrading Idease&penergygasGoldman SachsJohn NelsonNatural GasOilOil & Gaspetroleum
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