On Thursday, Citi adjusted its outlook on EnLink Midstream, LLC shares (NYSE:ENLC), reducing the price target to $15 from the previous $16, while keeping a Buy rating on the stock. The revision reflects anticipated delays in the company's carbon capture and sequestration (CCS) project, which is not expected to commence commercialization in the near future.
EnLink Midstream's flagship CCS initiative is now projected to become operational in mid-2026, a shift from the earlier expectation of 2025. This adjustment comes as the company faces unexpected setbacks due to the nascent nature of the emerging CCS industry. The management at EnLink Midstream has pointed out these unforeseen delays during their discussions.
Despite the delay, Citi remains optimistic about EnLink Midstream's involvement in the CCS business. The firm is currently negotiating with its primary customer and exploring opportunities with other potential partners. This ongoing dialogue indicates that EnLink Midstream continues to pursue its CCS strategy actively.
Citi's revised stock price target takes into account the impact of the postponed CCS project on the company's cash flows. Although the initial returns from the CCS project are anticipated to be significant, with expectations of more than eight times the investment, the timeline for realizing these returns has now been extended.
EnLink Midstream remains a point of interest for investors, as Citi continues to recognize the company's potential in the CCS sector despite the current challenges and delays. The updated price target of $15 reflects a cautious yet optimistic stance on the stock's future performance.
InvestingPro Insights
In light of Citi's recent adjustment of EnLink Midstream's price target, it's worth considering additional insights from InvestingPro. The company, with a market capitalization of $5.82 billion, is trading at a high Price/Earnings (P/E) ratio of 36.58, which reflects investor expectations for future growth.
This is slightly above the adjusted P/E ratio for the last twelve months as of Q1 2024, which stands at 32.72. Furthermore, the Price/Book ratio during the same period is 5.8, indicating that the stock may be trading at a premium compared to its book value.
InvestingPro Tips suggest that EnLink Midstream has a track record of maintaining dividend payments, with a dividend yield of 4.12% as of the last dividend ex-date on April 25, 2024. This could be appealing for income-focused investors. Moreover, analysts predict the company will be profitable this year, which is supported by a positive return on assets of 3.62% over the last twelve months leading up to Q1 2024.
For those considering adding EnLink Midstream to their portfolio, or current investors looking to deepen their analysis, there are 6 additional InvestingPro Tips available, which can be accessed by visiting: https://www.investing.com/pro/ENLC. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.