Kodiak Gas Services Inc (NYSE:KGS) received coverage initiation from multiple Wall Street firms, including Goldman Sachs, JPMorgan, and Stifel, following its IPO last month.
Goldman Sachs initiated coverage with a Buy rating and a price target of $25.00, noting that the company is well positioned to benefit from strong growth in both US gas supply (most immediately in the Permian) and upcoming demand inflections (notably from LNG capacity additions in 2025+).
The bank has a positive outlook for the stock's future potential due to several factors. Firstly, the overall compression market shows promising fundamentals, which are expected to drive EBITDA growth with relatively low capital intensity. Secondly, the company possesses a high-quality asset base compared to its peers, which should contribute to a stronger relative multiple. Additionally, the clear capital allocation strategy implemented by the company further adds to its attractiveness, all while maintaining an unchallenging valuation.
JPMorgan initiated coverage with an Overweight rating and a price target of $24.00, noting that the attractive Permian torque, coupled with a young, best-in-class compression fleet, positions the company to achieve upper-single-digit adjusted EBITDA growth through 2025.
“This attractive growth profile, alongside a relatively discounted valuation, creates a favorable risk/reward profile with notable upside potential upon successful Kodiak execution,” added JPMorgan.
Meanwhile, Stifel initiated coverage with a Buy rating and a price target of $22.00, noting that Kodiak holds the strongest contracted compression presence in the Permian basin and has significant exposure along the Gulf Coast.
“Despite a present weak gas environment, we believe that KGS benefits from its exposure to the Permian (driven by oil economics) and therefore its ability to supply future US LNG growth,” added Stifel.