On Monday, Mizuho Securities adjusted its stance on Southwestern Energy (NYSE:SWN), raising the stock from Underperform to Neutral. The firm also increased the price target to $9.00, up from the previous $6.00.
This change reflects the ongoing industry consolidation in U.S. shale and the anticipated acquisition of Southwestern Energy by Chesapeake Energy (NYSE:NYSE:CHK).
The revision in the stock's rating and price target comes as Mizuho Securities aligns its valuation models to account for the recent flurry of mergers and acquisitions in the sector.
The firm's analysts have updated their price targets for several companies involved in these transactions, including Pioneer Natural Resources (NYSE:NYSE:PXD), Hess Corporation (NYSE:NYSE:HES), Callon Petroleum (NYSE:NYSE:CPE), and now Southwestern Energy, to mirror the net asset value (NAV) based price targets of their respective acquirers.
Mizuho's updated financial models for the acquiring companies, which include Exxon Mobil (NYSE:NYSE:XOM), Chevron (NYSE:NYSE:CVX), and Apache Corporation (NASDAQ:APA) in addition to Chesapeake Energy, are now pro forma. These models take into account the deals and the expected synergies, assuming that they will be completed successfully, pending approval from both shareholders and regulators.
The firm's methodology remains cautious, however, as it also considers the potential impact on the companies' valuations should any of the proposed deals fall through. Mizuho's upgrade of Southwestern Energy to Neutral is based on the current terms of its pending acquisition by Chesapeake Energy, which is expected to reshape the company's future prospects.
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