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On Tuesday, Targa Resources Corp (NYSE:TRGP) received a favorable update from Stifel, as the firm raised its price target on the stock to $224 from $190. The firm maintains its Buy rating on the shares, citing several growth factors that contribute to the positive outlook.
The analyst at Stifel highlighted Targa Resources' robust growth prospects and free cash flow (FCF) generation as key reasons for the price target increase. Alongside these factors, a recent valuation uplift observed across the midstream sector also played a role in the revised target.
Stifel's report emphasized that, although their earnings estimates for Targa Resources remain unchanged from previous expectations, the firm increased the target multiple from 11.0x to 12.5x. This adjustment reflects the analyst's confidence in the company's performance and potential for growth.
In addition to the price target update, Stifel reiterated its recommendation of Targa Resources as a Select List Pick. This endorsement is based on the analyst's view of the company's strong market position and its ability to capitalize on industry opportunities.
The new price target of $224 represents Stifel's updated valuation of Targa Resources based on the company's financial outlook and industry trends. The Buy rating suggests that Stifel continues to see Targa Resources as an attractive investment option within the midstream energy sector.
In other recent news, Targa Resources Corp. reported a significant increase in its third-quarter earnings for 2024, marking a record adjusted EBITDA of $1.07 billion. This growth was attributed to increased volumes in the Permian region and a strategic shift to a fee-based model, which insulated 90% of the company's margins from commodity price fluctuations. On this note, Truist Securities raised the stock's price target for Targa Resources from $175.00 to $225.00, maintaining a Buy rating. This adjustment was made in light of anticipated significant free cash flow generation by the company in the coming years.
RBC Capital Markets also increased Targa Resources' stock target, maintaining an Outperform rating, following the announcement of strong Q3 results and an upward revision of full-year 2024 guidance. Moody's (NYSE:MCO) upgraded the company's rating to Baa2, acknowledging Targa's financial stability. In addition, Targa announced the construction of two new plants in the Permian, set to enhance sour gas treating capacity to over 2.3 billion cubic feet per day by early 2025.
InvestingPro Insights
Targa Resources Corp's recent performance aligns with Stifel's optimistic outlook. According to InvestingPro data, the company has shown impressive growth, with a 136.57% price total return over the past year and a substantial 70.84% return in the last six months. This strong performance is reflected in the stock trading near its 52-week high, with a price that is 99.98% of its highest point.
InvestingPro Tips highlight that Targa Resources has maintained dividend payments for 14 consecutive years and has raised its dividend for 3 consecutive years, underscoring the company's commitment to shareholder returns. This is particularly relevant given Stifel's emphasis on Targa's robust free cash flow generation.
The company's financial health appears solid, with a market capitalization of $44.35 billion and an EBITDA of $4.02 billion for the last twelve months as of Q3 2024. While the P/E ratio of 36.33 might seem high, it's worth noting that the PEG ratio of 0.79 suggests the stock may be undervalued relative to its growth prospects.
For investors seeking more comprehensive analysis, InvestingPro offers 17 additional tips for Targa Resources, providing a deeper understanding of the company's financial position and market performance.
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