Sterne Agee is out with a harsh criticism of Chesapeake Energy Corporation (NYSE: CHK) Thursday morning, while downgrading the company to Underperform with a $9 price target on the $14 stock.
Sterne's analysts said that the company has "questionable capital allocation" and a free cash flow deficit that "concerns us." All of this seems to be a hangover from prior management, which the analysts blamed for "sub-optimal capital allocation." The analysts cut their estimates in the belief that the rest of Wall Street will follow them lower.
Chesapeake Energy shares have dropped by 28 percent year-to-date as of Wednesday's close; however, Sterne noted that shares continue to trade at a "premium."
The analysts, who acknowledged being "late on this call," said that Chesapeake shares are still overvalued.
The stock was indicated down more than 3 percent in pre-market trading to $13.68.
Latest Ratings for CHK
|Mar 2015||Sterne Agee||Downgrades||Neutral||Underperform|
|Mar 2015||Global Hunter||Downgrades||Accumulate||Sell|
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