Please ensure Javascript is enabled for purposes of website accessibility

Why Centennial Resource Development Stock Jumped as Much as 11% Today

By Reuben Gregg Brewer - Updated Mar 11, 2021 at 3:48PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The U.S exploration and production company's shares got a helping hand from Wall Street; here's a quick update.

What happened

Shares of onshore U.S. oil and natural gas driller Centennial Resource Development (CDEV -5.92%) were higher by roughly 11% at 2:30 p.m. EST today. There was no particular news out of the company, but one Wall Street analyst did make a slight change.

So what

Although Piper Sandler analyst Mark Lear didn't alter the firm's investment call on Centennial Resource Development, keeping the stock at a neutral rating, the target price was increased to $5.50 per share. That was up from $3 per share previously, but since the stock closed at $5.13 yesterday, it looks like the hike was probably more about catching up to the current price than anything else.  

A man sitting in front of computer screens with stock information on them.

Image source: Getty Images.

Still, investors tend to like it when analysts increase a stock's price target, so a rally today isn't shocking. That said, Centennial Resource Development's price is currently above $5.50 per share, so any good news that this target price increase was calling for looks like it has already been priced into the stock. That said, oil prices were notably higher, while natural gas prices were down a little, which suggests that energy price fluctuations might also be in play here.  

Now what

Centennial Resource Development is a relatively small exploration and production company, with a modest $1.5 billion market cap. It also has a notable amount of leverage on its balance sheet, with a financial debt-to-equity ratio of around 2.6 times. The stock has benefited greatly from a shift in investor sentiment in the energy patch, as oil prices have been increasing (the shares are up 280% so far in 2021).

But this is not a stock for conservative investors since news from Wall Street or the oil patch can lead to material price swings -- higher and lower. Today is just one of many examples of this fact over the past year or so. Most long-term investors looking at the energy sector would be better off with a larger and financially stronger name.  

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Centennial Resource Development, Inc. Stock Quote
Centennial Resource Development, Inc.
$6.52 (-5.92%) $0.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.