Marathon Oil Gears Up For Strong 2024: Analyst Forecasts 30% Stock Upswing
Marathon Oil Corp (NYSE:MRO) stock hasn’t been an investor darling in 2023. So far in 2024 too, the stock has gained just 1.8%. This appears dismal compared to the broad market SPDR S&P 500 ETF‘s (NYSE:SPY) 7.7% rise and the SPDR S&P Oil & Gas Exploration & Production ETF‘s (NYSE:XOP) 3.9% ascent. Nonetheless, the stock has recovered 4% since its fourth-quarter earnings report.
However, green shoots appear to be emerging when analyzing the valuations of major companies in the Exploration and Production (E&P) sector, based on the latest pricing trends.
Also Read: Marathon Oil’s Q4 Earnings Exceed Expectations: Analyst Highlights Promising 2024 Cash Flow Forecast
The Marathon Oil Analyst: JPMorgan analyst Arun Jayaram has an Overweight rating on Marathon Oil stock. Jayaram’s price target is set at $32 per share, signaling a potential 30% upside.
The Marathon Oil Thesis: JPMorgan’s review of fourth-quarter earnings for E&P companies, shed light on Marathon Oil’s promising outlook.
The current oil and gas strip prices, with WTI at $76.60 and $71.12 per barrel and NYMEX gas strips at $2.42 and $3.46 per MMBtu for 2024-25, play a pivotal role in Jayaram’s evaluation. In their detailed analysis, JPMorgan analysts looked at key valuation metrics such as FCF yield, EV/EBITDA multiple, and EV/DACF multiple.
At strip pricing, Marathon Oil stands out with a 16% Free Cash Flow (FCF) yield in 2024, placing it among the top performers in JPMorgan’s coverage group. The updated multiples at strip pricing reveal Marathon Oil’s favorable position, contrasting with the broader E&P sector.
Jayaram emphasizes the attractiveness of Marathon Oil’s FCF yields at strip pricing, with 2024 showcasing Vermilion Energy Inc (NYSE:VET), Vital Energy (NYSE:VTLE), and Marathon Oil as top performers.
Looking ahead to 2025, Callon Petroleum Co (NYSE:CPE), Gulfport Energy Corp (NYSE:GPOR), Marathon Oil and Vermillion Energy emerge as the most appealing choices.
Despite the positive outlook, Jayaram provides a cautious note on consensus estimates, deeming them reasonable for oil-leveraged E&Ps but potentially too high for gas-leveraged stocks. Marathon Oil’s gas coverage, specifically, is 14% lower than the consensus estimates at the current strip prices.
Weekly stock performance showcases Marathon Oil’s resilience in a dynamic market. The SPDR S&P Oil & Gas Exploration & Production index’s +2.5% WoW increase underscores Marathon Oil’s strength, positioning it favorably against notable laggards in the industry.
As Marathon Oil demonstrates robust performance and JPMorgan’s bullish stance, investors are keenly watching for potential gains, setting the stage for a promising trajectory in the coming quarters.
MRO Price Action: Marathon Oil stock was at $24.60 at the end of trading day on March 1.
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