UPDATE: Raymond James Downgrades DCP Midstream LP (DCP) to Outperform
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Raymond James analyst J.R. Weston downgraded DCP Midstream LP (NYSE: DCP) from Strong Buy to Outperform with a price target of $24.00 (from $35.00).
The analyst comments "We see DCP as one of the more mis-priced names in our space due to broader under-appreciation of its integrated assets and operating leverage within its G&P and L&S segments. In terms of today's update, we don’t have to make this a complicated call – DCP has the most NGL price sensitivity in our coverage universe, and we are increasingly optimistic around higher U.S. NGL prices later this year and into 2022, led by propane. In turn, our revised estimates are above the high end of DCP’s 2021 EBITDA guidance range and above the Street. Our optimism spills into 2022, as well. From a valuation perspective, DCP currently trades at ~9x 2022E EV/EBITDA, a slight premium to mid-cap midstream at ~8.5x, but well below perceived to be higher quality large-cap peers currently above ~10x. Further, the entire group remains 1-2 turns discounted vs. prior periods with similar U.S. production growth forecasts. As the operating environment improves, we expect investors will be more willing to value DCP closer to integrated peers - the "thematic" tie in is arguably even more important than the estimate/valuation set up."
Shares of DCP Midstream LP closed at $30.76 yesterday.
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