Nine Energy Service's Solid Financial Performance Prompts 16% Price Target Boost By This Analyst

EF Hutton analyst Ignacio Bernaldez reiterated a Buy rating on Nine Energy Service Inc NINE and raised the price target from $15.5 to $18.
The analyst has raised the price target based on a 8x EV/EBITDA multiple of the 2023 EBITDA estimate. The previous price target was based on 7x of EBITDA estimate.
The analyst has increased the valuation multiple to 8x based on three main factors.
First, the analyst sees the entire oilfield services industry re-rate to a modestly higher multiple. Six months ago, the PHLX Oil Service Sector Index (OSX) had an EV/EBITDA multiple of 9.99x on July 12, 2022, which increased to an 11.59x multiple on January 12, 2023.
Secondly, based on NINE’s especially strong financial performance over the past two quarters, including surpassing the EPS and cash flow estimates, the analyst now also sees NINE as re-rating to a higher valuation level relative to its peer group.
Third, based on strong financial performance, a strong macro-backed increase in activity levels in OFS across the U.S. and especially in the Permian Basin, the analyst has become even more confident that NINE will reach or surpass 2023 EPS and cash flow estimates.
The company’s capital-light product and geographic diversity offer an opportunity to further secure market share in a landscape experiencing increased momentum across activity and spending, added the analyst.
NINE has material debt maturities over the next 12 months and repayment or re-financing successfully is key in maximizing equity value, said the analyst.
Price Action: NINE shares are trading higher by 0.06% at $16.20 on the last check Friday.
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