Magnolia Oil & Gas: A Balanced Hold Rating Amid First-Quarter Performance and Strategic Acquisitions

Magnolia Oil & Gas (MGY – Research Report), the Energy sector company, was revisited by a Wall Street analyst on May 8. Analyst William Janela from Mizuho Securities maintained a Hold rating on the stock and has a $26.00 price target.

William Janela has given his Hold rating due to a combination of factors including Magnolia Oil & Gas’s first-quarter performance and their strategic acquisitions. The company’s stronger-than-expected oil volumes for the first quarter contributed to an EBITDX that was approximately 3% higher than the market consensus. While this positive performance might suggest an upward potential, Janela notes that the oil volumes are expected to flatten in subsequent quarters. Moreover, the recent $125 million acquisition of Giddings assets aligns with the company’s strategy, but Janela suggests that investors are awaiting clearer insights into the company’s inventory depth and overall acquisition strategy.

In maintaining a Neutral rating and a $26 price target, Janela also considers Magnolia’s unchanged capital expenditure outlook and production growth guidance. The company anticipates a high single-digit percentage growth in production, which is consistent with previous estimates, and maintains capital expenditure guidance despite the new Giddings assets. Additionally, Janela highlights the company’s ongoing cost reduction efforts, which are forecasted to decrease lease operating expenses in the second half of the year. The company’s valuation relative to peers is also a factor, with Magnolia trading at a premium based on EBITDX multiples. These considerations lead Janela to conclude that the stock should be held at the current time.

Janela covers the Energy sector, focusing on stocks such as Murphy Oil, Civitas Resources, and SM Energy. According to TipRanks, Janela has an average return of 31.7% and a 63.27% success rate on recommended stocks.

In another report released on May 8, Piper Sandler also maintained a Hold rating on the stock with a $29.00 price target.

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Magnolia Oil & Gas (MGY) Company Description:

Magnolia Oil & Gas Corp. is engaged in oil and gas exploration and production business. It operates assets located in the Eagle Ford Shale and Austin Chalk formations in South Texas. The company was founded on July 31, 2018 and is headquartered in Houston, TX.