- EF Hutton Analyst Ignacio Bernaldez reiterated a buy recommendation Nine Energy Service Inc NINE and raised the target price to $18 from $15.5.
- The analyst has raised the price target based on an 8x EV/EBITDA multiple of the 2023 EBITDA estimate. Previous price target was based on 7x EBITDA estimate.
- The analyst has increased the valuation multiple to 8x based on three main factors.
- First, the analyst sees the overall oilfield services industry being re-rated to a slightly higher multiple. Six months ago, the PHLX Oil Service Sector Index (OSX) had an EV/EBITDA multiple of 9.99x on July 12, 2022, rising to 11.59x on January 12, 2023.
- Second, due to NINE’s particularly strong financial performance over the past two quarters, including beating EPS and cash flow estimates, the analyst now also sees NINE re-rated to a higher valuation level relative to its peer group.
- Third, the analyst’s strong financial performance and strong macro-backed uptick in activity levels at OFS in the US and particularly the Permian Basin has made the analyst even more confident that NINE will meet or exceed 2023 EPS and cash flow estimates.
- The company’s capital-poor product and geographic diversity provide an opportunity to further secure market share in a landscape that is witnessing increasing momentum in activity and spending, the analyst added.
- NINE has significant debt maturities over the next 12 months and successful repayment or refinancing is key to maximizing equity value, the analyst said.
- Price promotion: NINE shares trade 0.06% higher at $16.20 on the last check Friday.
- Photo via company
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