Diamondback cut at BofA as value defined by FCF 'disconnected from consensus'
ssuaphoto/iStock via Getty Images

Diamondback Energy (NASDAQ:FANG) -2.9% in Monday's trading after Bank of America downgraded shares to Underperfrom from Neutral with a $143 price target, saying it remains constructive on the long-term price of oil but views Diamondback as fully valued with no obvious rate of change in key drivers.
"We are struck by the fact that many on the Street have pushed up price targets for FANG in recent days, coincident with if not in response to FANG's second acquisition in as many months," analyst Doug Leggate wrote. "It has left our valuation and price objective looking disconnected from a sector average that has moved up to $183 per Bloomberg."
Leggate said BofA's distributable cash flow suggests Diamondback (FANG) shares are overvalued by ~30%; company management has materially improved its business through a strong track record of acquisitions, but there are limits to value, "and from here we believe this is being more than recognized by the market at current levels."
Diamondback Energy (FANG) recently agreed to buy Permian Basin assets from Lario Oil & Gas for $850M in cash and 4.18M common shares, and from FireBird Energy for $775M in cash and 5.86M shares.