Comstock raised to Neutral, Continental cut to Sell at Piper Sandler
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Comstock Resources (NYSE:CRK) was upgraded Friday to Neutral from Underweight with a $17 price target, edged up from $16, at Piper Sandler, which said the stock has been "beaten up by capital concerns" but is 20% cheaper than before the Q1 earnings release, when natural gas also was ~$8/MMBtu.
Even though Comstock (CRK) has flaws, analyst Mark Lear believes downside risks "are now more balanced and the potential to draw in investors with a capital return framework could be a strong catalyst later this year."
Lear also downgraded Continental Resources (NYSE:CLR) to Underweight from Neutral in a valuation call, given the stock's strong relative performance in the wake of owner Harold Hamm's take-private proposal.
Continental (CLR) has since outperformed E&P peers as the broader energy group has come under pressure from recession fears, but Lear thinks the company will now be unable to participate in potential upside for oil.
Meanwhile, Piper Sandler says its favorite ideas in the E&P group remain Diamondback Energy (FANG), Marathon Oil (MRO) and Northern Oil & Gas (NOG).
If Harold Hamm's offer for Continental (CLR) gets done on currently proposed terms by year-end, the $5.68 net spread offers an 18% IRR, "but it will probably be better than that," Chris DeMuth Jr. writes in a bullish analysis published recently on Seeking Alpha.