SM Energy’s 2025 Efficiency and Growth Potential Reinforce Buy Rating Despite Near-Term Challenges

Analyst Gabriele Sorbara from Siebert Williams Shank & Co maintained a Buy rating on SM Energy (SM – Research Report) and keeping the price target at $65.00.

Gabriele Sorbara’s rating is based on several factors influencing SM Energy’s future outlook. Despite SM Energy’s underperformance in the fourth quarter of 2024 and a lower-than-expected guidance for the first quarter of 2025 due to reduced oil production and increased capital expenditure, Sorbara highlights a more efficient 2025 outlook with lower capital spending. The company’s 2025 capital expenditure is projected at approximately $1.3 billion, which is significantly below prior estimates and consensus, suggesting improved operational efficiency.
Moreover, SM Energy’s production guidance for 2025 shows a slight increase compared to consensus estimates, indicating potential for production growth. The company’s ability to generate free cash flow is also noted as a positive sign, with projections revised upward. Additionally, the valuation of SM Energy on an EV/EBITDA basis suggests that it is trading at a discount compared to its peers, providing a compelling investment opportunity. As a result, Sorbara reaffirms a Buy rating, anticipating that the improved outlook and strategic adjustments might lead to share outperformance.

In another report released yesterday, Roth MKM also maintained a Buy rating on the stock with a $50.00 price target.