Apache Corp. (NYSE:APA) is an independent oil and gas company based in Texas. It has operations in Gulf of Mexico, Texas, Permian and Anadarko basins. It also has exploration and production interests in several other countries around the globe.
Last quarter, Apache reported earnings of $2.95, or 10 cents above expectations. With revenues of $4.3 billion coming in almost 45% higher than the prior year, APA is selling at just six times cash flow and 1.3 times book, both trough valuations. Its forward multiple of under 7 is also nearing historically cheap valuation levels.
Apache had been a relative market performer until August, with the stock underperforming the S&P 500 by nearly 20% since then. It has also underperformed its peer group by a similar amount. As such, I look for APA to move to $105 by April expiration.
Based on APA’s current market price of $97.48 and using a target price of $105, a target date of April 20, 2012, and $10,000 of investment capital, this is an excellent candidate for capturing some nice upside by buying an April call spread, selling an April put spread or buying the stock.
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