FBR analyst Joseph Allman initiates coverage on shares of Chesapeake Energy Corporation (NYSE:CHK) with an Underperform rating and a $5 price target, which represents just under a 32% decrease from where the stock is currently trading.

Though Allman commends management as it strives to reduce debt, sell assets, cut costs, and enhance operations, ultimately, Allman fears “the balance sheet will continue to be stressed,” valuing equity at $0.

Allman¬†wrote,¬†“Despite management’s best efforts, the debt and transportation commitments hole still appears too deep to dig out of. We think the equity is significantly overvalued, especially since we predict that Chesapeake’s financial condition will continue to be stressed. The very near-term stock call is a trickier one, for the stock has seen and could continue to see some positive moves with higher commodity prices and positive financial achievements. However, overall, we are negative on the stock over the next 12 months.”

“The stock price, debt prices, and other sell-side analyst commentary indicate that Chesapeake is pulling itself out of its financial distress. We agree that the company has given itself more time, but we are skeptical about Chesapeake’s ability to execute the asset sales necessary to meet its obligations over the next few years. If the unsecured market opens to Chesapeake and it can refinance its debt, that would help the company a lot, in our view. We are not assuming that in our model, though,” the analyst continued.

As usual, we recommend taking analyst notes with a grain of salt. According to TipRanks, analyst Joseph Allman is ranked #3,916 out of 4,143 analysts. Allman has a 31% success rate and faces a loss of 8.9% in his yearly returns. However, when recommending CHK, Allman earns 19.2% in average profits on the stock.

TipRanks analytics exhibit CHK as a Hold. Based on 15 analysts polled in the last 3 months, 4 rate a Buy on CHK, 6 maintain a Hold, while 5 issue a Sell. The consensus price target stands at $6.09, marking a nearly 17% downside from where the shares last closed.screen-shot-09-13-16-at-10-39-pm