New comments from analyst In a research note titled 5 Reasons to Buy Heading into Fall, Raymond James’s Jeremy McCrea raised his financial expectations Whitecap Resources Inc. (WCP-T).
The analyst pointed to: a shift in capital spending to target “much stronger well economics”; a “low cash flow decline to build on”; the need to change its valuation to value undrilled land “much higher”; low sentiment and investor interest despite improving fundamentals; and a group of near-term catalysts that could include a special dividend or substantial issuer bid.
Keeping a “strong buy” rating, Mr. McCrea increased his target by $1 to $10. The average is $8.95.
“As companies become larger, there is less focus on well economics and more emphasis on FCF generation,” he said. “Unfortunately, as a result, investors can miss some important inflection points where share price returns can be the greatest. We believe that one of these inflection points is happening today at WCP given its acquisitions this year and where we are seeing capex being directed now (i.e., to much higher return plays). We look at how this shift will impact the future of the company given its low base decline, inexpensive valuation and investor sentiment that doesn’t appear to appreciate the fundamental changes we’ve seen this year. With annual discretionary cash flow now reaching 20 per cent of WCP’s market-cap, there should be plenty of shareholder ‘friendly’ catalysts that begin to drive investors back into the stock near-term.”