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On Monday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Targa Resources (NYSE:TRGP), reducing the price target to $218 from the previous $226 while maintaining an Outperform rating on the stock. Currently trading at $177.62, the company has analyst targets ranging from $157 to $259, with InvestingPro data showing the stock as overvalued based on its proprietary Fair Value model. The revision follows a period of underperformance for Targa Resources, which saw its shares decline by 17.7% since January 21. This drop contrasts with a smaller 6.4% decline in the broader American Midstream Energy Index (AMEI) amid concerns about the rate of associated gas growth in the Permian Basin, macroeconomic uncertainties, and potential impacts from an impending trade war that could affect demand for U.S. energy exports. Despite recent volatility, InvestingPro data reveals impressive returns, with the stock up 55.1% over the past year and maintaining strong five-year performance metrics.
Despite the recent downturn, Mizuho’s analysts express a continued positive stance on Targa Resources’ growth potential. They cite several factors supporting this view, including increasing gas-oil ratios in the Permian, clear visibility to near-term volume growth unaffected by recent events, and a strong customer base with major players like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX). These customers are expected to drive overall production growth in the Permian and may be less likely to cut back on activities.
The firm has made adjustments to its estimates, raising them for Targa Resources’ Badlands consolidation but tempering growth expectations for Permian inlet volumes in the forecast for fiscal year 2026 and beyond. With a market capitalization of $38.65 billion and last twelve months EBITDA of $4.129 billion, Targa maintains a solid financial foundation, earning a "GOOD" Financial Health score from InvestingPro, which offers 12 additional valuable insights about the company’s performance and prospects in its comprehensive Pro Research Report. Additionally, they anticipate a modest deferral in capital expenditures during the same period. Despite these changes, the forecasted adjusted EBITDA for fiscal years 2026 and 2027 sits slightly below consensus estimates on Wall Street.
The new price target of $218 reflects a recalibration due to sector multiple compression, according to Mizuho’s analysis. This adjustment takes into account the broader market dynamics and valuation metrics within the energy sector. Targa Resources, with its strategic positioning and asset base, remains a favored stock by Mizuho under the current market conditions.
In other recent news, Targa Resources has been the focus of several analyst updates and financial projections. UBS maintained a Buy rating on Targa Resources, setting a price target of $259, and highlighted an expected increase in EBITDA for the first quarter of 2025 to $1,155 million, driven by strong sales and export volumes of natural gas liquids. Truist Securities also reiterated a Buy rating, raising its price target to $235, reflecting confidence in Targa’s expansion projects, which are expected to enhance earnings and free cash flow. RBC Capital Markets slightly increased its price target to $221, noting Targa’s revised capital expenditure forecast and its potential long-term returns for shareholders.
Citi analysts raised their price target to $227, citing rapid infrastructure development and new growth initiatives, including pipeline expansions and increased export capabilities. They project a compound annual growth rate of 10% for EBITDA over five years. Meanwhile, CFRA increased its price target to $208, maintaining a Hold rating, and highlighted Targa’s strong position in the Permian region and its largely fee-based business model. The company anticipates a reduction in capital expenditures in 2025, with adjusted EBITDA expected to grow by 15% at the midpoint. These developments indicate a positive outlook from analysts, driven by Targa Resources’ strategic initiatives and financial performance.
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