UPDATE: Seaport Global Securities Upgrades Targa Resources (TRGP) to Buy
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Seaport Global Securities analyst Sunil Sibal upgraded Targa Resources (NYSE: TRGP) from Neutral to Buy with a price target of $35.00.
The analyst comments "We expect TRGP’s integrated NGL platform to perform well in the current environment wherein NGL demand strength appears to be a bright spot in the midst of an uncertain demand outlook for other hydrocarbons. Meanwhile, TRGP’s exposure to federal lands drilling in NM is limited and likely less than 5% of the total gross margins, additional exposure comes from drilling around the Fort Berthold reservation in Bakken where drilling is regulated by Department of Interior agencies and the affiliated tribes, which we estimate as also less than 5% net for TRGP’s interest. Meanwhile, Targa management has also taken steps to shore up certainty around its balance sheet by opportunistically tapping the market for ~ $2 billion at low coupons to lower its debt cost. While Targa stock has been strong recently we believe a strong outlook for NGL still provides upside. We estimate that TRGP trades at an ~8.5x 2021 EBITDA multiple and a FCF yield of 12% with the company’s FCF likely to be enhanced by buy-back of debt-funded DEVCO interest in 2022. We are thus upgrading to Buy (from Neutral) with a PT of $35."
Shares of Targa Resources closed at $30.23 yesterday.
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