UPDATE: J.P. Morgan Initiates Coverage on Jones Energy on Multiple Positive Factors

In a report published Friday, J.P. Morgan analyst Joseph Allman initiated coverage on Jones Energy (NYSE: JONE) with an Overweight rating and $18.00 price target.

In the report, J.P. Morgan noted, “We initiate coverage of JONE with an Overweight rating. The pure-play MidContinent E&P company differentiates itself with its low-cost operations, above-average rates of return, above-average production and cash flow growth, and capex spend relatively close to cash flow. Hesitation about the relatively short inventory of wells to drill in the company's two key plays currently may be restraining the EBITDA multiple. However, we expect that successful operational and financial execution alone can help the stock rise to our Dec-2014 price target of $18, which assumes the stock continues to trade at its current multiple of NAV. Also, we think Jones will continue to add drilling inventory in a cost-efficient manner, which we do not contemplate in our current model.”

Jones Energy closed on Thursday at $15.02.