Piper Sandler Initiates Coverage of Nabors Industries (NBR) Stock with an Underweight Rating

Nabors Industries Ltd. (NYSE:NBR) is one of the Best Beaten Down Stocks to Buy Now. Piper Sandler initiated coverage of the company’s stock with an “Underweight” rating and a price objective of $30, as reported by The Fly. Notably, the firm expects a challenging backdrop for US land, expecting the influence on oil prices because of tariffs and production hikes. Furthermore, the analyst is expecting a persistent negative rate-of-change environment for the balance of 2025.

Piper Sandler Initiates Coverage of Nabors Industries (NBR) Stock with an Underweight Rating

A drilling rig on a large oil field, capturing a crucial moment of the extraction process.

However, Nabors Industries Ltd. (NYSE:NBR) completed the acquisition of Parker Wellbore, which has strengthened its portfolio with the complementary businesses. The acquisition is expected to be immediately accretive to Nabors Industries Ltd. (NYSE:NBR)’s 2025 FCF and to improve leverage metrics. Overall, the addition of Parker is a huge milestone for the company, significantly expanding Nabors Industries Ltd. (NYSE:NBR)’s Drilling Solutions business and adding strong cash generation to the combined company.

Apart from $130 million in incremental adjusted EBITDA for 2025 post-closing, Nabors Industries Ltd. (NYSE:NBR) remains on track to realize $40 million of cost synergies. Notably, Parker capital expenditures post-closing are aimed at $60 million for 2025. Miller Value Partners, an investment management company, released its Q1 2025 investor letter. Here is what the fund said:

“Our two largest detractors during the quarter were Gannett (GCI) and Nabors Industries Ltd. (NYSE:NBR), with shares down 43% and 26%, respectively, during the quarter. Both companies’ share prices are at deep discounts to our view of their long-term fundamental value, and we have recently increased position sizes in both holdings.

Nabors recently completed the acquisition of Parker Drilling. The transaction is accretive to free cash flow per share. Parker provides Nabors greater access to the growing lateral drilling marketplace. In addition, the transaction will significantly increase Nabors Drilling Solution (“NDS”) segment, which has market-leading technology and strong global growth opportunities. With very low capital intensity and high free cash flow conversion, Nabors NDS segment should support accelerating future free cash flow generation. While there is ongoing near-term risk on weaker than expected domestic and international drilling expenditures, we see these risks significantly discounted in the current share price. While there is also potential integration risk with doing an acquisition, the Parker Drilling transaction provides significant margin of safety in our opinion (attractive cost savings, balance sheet benefits, potential non-core asset sales and accelerating free cash flow generation). Nabors share price looks extremely attractive, below one times cash flow (approaching their Covid 2020 all-time lows). At a greater than 50% normalized free cash flow yield and EV/EBITDA (2025) below 3x, we see long-term upside potential multiples of the current share price.”

While we acknowledge the potential of NBR to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than NBR and that has 100x upside potential, check out our report about this cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.