Wednesday, October 19, 2011

Natural Gas: Range Resources: Cut to SELL, takeover unlikely - Canaccord (RRC)

This may set up a buying opportunity but I wouldn't be too eager. In late premarket action the stock is down 3.23% at $72.00.
From Notable Calls:
Range Resources (NYSE:RRC) the recent high-flying Marcellus play is getting downgraded at Canaccord to SELL from Hold with a $60 price target (prev. $61)

According to Canaccord, over the past month, RRC has outperformed the sector by over 20% on apparent takeout speculation. They believe RRC reflects a ~30% buyout premium even though a buyout in their view seems increasingly unlikely. RRC trades at a 14x firms ’12 EBITDA estimate – an almost 140% premium to the sector.

As Range should spend ~60% beyond cash flow next year, we see little potential to accelerate value creation further within the current equity capitalization. The bull case is that the company’s assets are worth more in the hands of a better-capitalized enterprise....MORE
Notablecalls: RRC has been on tear of lately helped by all sorts of takeover rumours and results that revealed better than expected production.

The thing is up almost 50% from its Oct 4 low.

Now we have Canaccord throwing cold water on the takeover speculation saying potential suitors have already too much on their plates. It appears one one the suitors denied their interest outright.

Yet the thing trades like it's going to be taken over any moment now...