Is Montage Resources stock a strong-buy amidst the pandemic?

Is Montage Resources stock a strong-buy amidst the pandemic?

There was a lot of uncertainty over the oil sector during the last week. Crude oil prices experienced a historical decline on Tuesday, as the demand lowered due to the coronavirus pandemic. However, oil rebounded quickly. Despite the recent crisis, it is a very profitable investment. Experts recommend choosing this sector for hefty gains.

Montage Resources is a small-cap corporation in Appalachia. The company engages in hydrocarbon exploration and production, as well as transport, with natural gas and crude oil operations in Ohio, Pennsylvania, and West Virginia. Montage owns 325 actively producing wells and over 195,000 undeveloped acres.

The company’s revenue hit $174.1 million in 2019. Furthermore, its EPS skyrocketed, exceeding the forecast by 608%. Overall, Montage Resources gained 67% and 34%, respectively, year-by-year.

How does the company fare this year?

Montage Resources’ shares declined by 40% in 2020 due to the coronavirus crisis. However, the company currently has an attractive point of entry, just $4.82 per share. Usually, oil share prices are much higher. That’s why analysts advise grabbing this stock while it sells so low.

John White, Roth Capital analyst, noted that with the expert’s estimation, this stock would generate $32 million of free cash flow in 2020. He thinks that the bulk of this cash flow, $20.4 million, occurs in the first quarter due to robust production and much higher commodity prices versus the remaining quarters.

However, it is only one of the reasons to buy Montage’s shares. Even though the world’s major oil suppliers are moving to cut production and boost prices, the cuts may not last. And Montage is well-positioned to gain if they resume their crude oil price war.

White set his price target at $6.50 for this stock, implying an upside of 35%. Other Wall Street analysts also think that Montage Resources is a strong buy. However, with their estimation, the potential upside lands at 25%.

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