InsiderTrades.com readers know that HighPeak Energy, Inc. (NASDAQ: HPK) insiders are buying in 2023. Purchasing has only been bullish for the last two years and spiked in Q2 following the announcement of a dilutive stock offering and a path to profitability. More than half a dozen execs and major shareholders, including John Paul Dejoria, made purchases in Q2, followed by additional purchases in Q3.
The CEO and President of HighPeak Energy, Inc. bought shares in September. These purchases were made days following the closing of a new loan. The new financing is worth $1.2 billion and will finance operations, refinance debt, and streamline the capital structure, further strengthening the business. The latest insider purchases amount to about 0.2% of the current market cap, bringing total insider holdings to more than 16%.
HighPeak Energy, Inc. is a tightly held stock. Insiders hold more than 16%, institutions own 10%, and VC/PE firms hold nearly 70%. That presents a potential hurdle for share prices as they advance, but it is not likely VC/PE firms will be cashing out of this small-cap energy play soon.
HighPeak Energy also updated its production outlook. The company says it produces more than 50K bpd, which aligns with the prior forecast. The company forecasts an annualized EBITDA run rate of roughly $1.2 billion, with oil prices near recent levels. This has the company on track to begin reducing debt later this year, and it expects to bring a third drilling rig online between then and now.
Analysts Expect Double Digit Growth, Wider Margins
Analysts are raising their EPS targets for HighPeak Energy. The analysts expect HighPeak to produce more than 70% top-line growth in 2023 and nearly 25% in 2024, with margins expanding yearly. Margin is expected to expand about 60% between 2023 and 2024 to drive a significant increase in earnings and a possible increase in the dividend.
The company pays a small but sustainable dividend yielding about 0.6% with shares near $14.75. The dividend is only 5% of the 2023 EPS outlook and safe given the outlook for EPS growth. A dividend increase is more than possible, assuming the company can pay down debt and free up additional cash flow. It is already generating FCF in 2023.
InsiderTrades is tracking two analysts with ratings on the stock. They have differing opinions and a wide range of targets that amount to a Hold and about 45% of upside potential. The most recent target was set by Roth MKM, which has a price target over 100% above the current price action.
The Next Catalyst for HPK Stock is Q3 Earnings
The next visible catalyst for HPK stock is the Q3 earnings release in early November. The analysts expect 20% sequential revenue growth, 40% YOY, with adjusted profit margin more than doubling. These estimates may be low, especially on the bottom line, given the rise of oil prices in the last quarter. However, the key information will be the start-up of operations at the third rig and any plans for additional rigs once completed.
The price action in HPK stock is down 6% in early October, presenting an opportunity for investors. The market is down, but the move is consistent with a recent bottom and reversal pattern that suggests a rebound will follow soon. In this scenario, the market should find support at or near current levels and begin forming a base. Once formed, a rebound should follow, but headwinds may be present until the Q3 report is released.