Energy

SunTrust Has 5 Buy-Rated Energy Stocks Trading Under $10 With Huge Upside Potential

Lee Jackson

Published: March 2, 2019 7:15 am

Last Updated: January 31, 2020 12:02 am

While most of Wall Street focuses on large and mega cap stocks, as they provide a degree of safety and liquidity, many investors are limited in the number of shares they can buy. Many of the biggest public companies, especially the technology giants, trade in the low-to-mid hundreds, all the way up to over $1,000 per share. At those steep prices, it’s pretty hard to get any decent share count leverage.

Many investors, especially more aggressive traders, look at lower-priced stocks as a way to not only make some good money but to get a higher share count. That can really help the decision-making process, especially when you are on to a winner, as you can always sell half and keep half.

SunTrust has continued a solid rise in the brokerage and investment bank arena, and the firm’s merger with BB&T will make them the sixth largest bank in the United States. We screened the firm’s outstanding research database and found five energy stocks trading under the $10 level that could provide investors with some solid upside potential. While much better suited for aggressive accounts, they could prove exciting additions to portfolios looking for solid alpha potential and energy exposure.

Callon Petroleum

This is among the small-cap stocks that the SunTrust team currently feels very comfortable about. Callon Petroleum Co. (NYSE: CPE) is an independent oil and natural gas company that is engaged in the exploration, development, acquisition and production of properties, with a focus on the acquisition and development of unconventional oil and natural gas reserves in the Permian Basin.

The company’s drilling activity focuses on the horizontal development of various prospective intervals in the Midland Basin, including multiple levels of the Wolfcamp formation and the Lower Spraberry shale. In addition, Callon made a huge $570 million acquisition of 29,000 net acres last May that more than doubled its Delaware Basin footprint.

The SunTrust price target for the shares is $11, and the consensus target is even higher at $12.13. The stock was trading on Friday’s close at $7.74.

Gulfport Energy

This has been one of the favorites around Wall Street among the smaller and more nimble companies. Gulfport Energy Corp. (NASDAQ: GPOR) is an independent oil and natural gas exploration and production company with its principal producing properties located in the Utica Shale of eastern Ohio and along the Louisiana Gulf Coast.

This week, the company reported earnings that fell short of consensus estimates, but revenues rose a solid 4.5% year over year and were better than Wall Street analysts had anticipated. The company also announced that budgeted 2019 total capital expenditures of $565 million to $600 million will be funded entirely within cash flow.

SunTrust has a whopping $13 price target, which compares to the posted consensus target of $11.63. The shares closed at $7.84 on Friday.

Lonestar Resources

This may be the consummate play for aggressive accounts looking to buy size. Lonestar Resources US Inc. (NASDAQ: LONE) engages in the acquisition, development and production of unconventional oil and natural gas properties. Its portfolio includes the Eagle Ford Shale.

The company announced this week that its board of directors has approved a capital-flexible budget that ranges from 17 gross/15.6 net wells, which it estimates will cost $107 million, to a high of 20 gross/18.6 net wells, which are budgeted to cost $130 million. As commodity prices fell precipitously in the fourth quarter of 2018, Lonestar suspended drilling operations pending the negotiation of contracts for drilling and completion operations, which gave the company sufficient flexibility to “dial-in” activity levels to react to commodity prices and expected cash flow generation capacity.

The massive $8 SunTrust price target compares to the $6.50 consensus figure from analysts. Lonestar shares ended the week at $4.73 apiece.

Ring Energy

This is another small capitalization play that analysts at SunTrust have been positive on for some time. Ring Energy Inc. (NYSE: REI) is engaged in oil and natural gas acquisition, exploration, development and production activities in the United States. Its exploration and production interests are focused on Texas and Kansas, while its primary drilling operations target the Central Basin Platform in Andrews County and Gaines County, Texas, and the Delaware Basin in Reeves County and Culberson County, Texas.

Ring Energy’s long-term business strategy is focused on the exploration, development and acquisition of oil and natural gas properties in the Permian and Mid-Continent regions of the United States, and it primarily sells its oil and natural gas production to end users, marketers and other purchasers.

SunTrust has set its price target at a massive $12. The posted consensus figure was last seen at $8.92. The stock closed trading most recently at $6.33.

Superior Energy Services

This is an oilfield services play that looks very cheap now. Superior Energy Services Inc. (NYSE: SPN) provides a range of services and products to the energy industry related to the exploration, development and production of oil and natural gas.

The company’s segments include Drilling Products and Services, which rents and sells bottom hole assemblies, drill pipe, tubulars and specialized equipment for use with onshore and offshore oil and gas well drilling, production and work-over activities.

The Onshore Completion and Workover Services segment provides pressure pumping services used to complete and stimulate production in new oil and gas wells, fluid handling services and well-servicing rigs that provide a range of well completion and maintenance services.

Lastly, the Production Services segment provides intervention services, such as coiled tubing, cased hole and mechanical wireline, hydraulic workover and snubbing, and remedial pumping services, and the Technical Solutions segment provides services requiring specialized engineering, manufacturing or project planning.

The SunTrust price target for the stock is $8. The consensus target is $6.26, and the shares closed on Friday at $4.79.

These are five energy stocks for aggressive accounts that look to get share count leverage on companies with sizable and reasonable upside potential. While not suited for all investors, they are not penny stocks with absolutely no track record or liquidity, and a major Wall Street firm has research coverage on them.