On Tuesday, CFRA downgraded ONEOK Inc (NYSE: NYSE:OKE) shares from a Buy to a Hold rating, though the firm raised its price target on the stock to $97 from $90. The move comes in response to the stock's performance this year, which has seen a significant increase compared to its peers.
The downgrade was attributed to the stock's valuation after ONEOK shares surged 31% year-to-date, outpacing the median gain of 17% in its peer group. The energy sector, particularly the midstream segment, is often seen as a safer bet during times when energy spot prices are low. This is because in such segments, the volume of commodities transported or stored tends to be more important than the fluctuating prices.
Despite the general attraction to midstream companies in the current energy price environment, concerns were raised regarding ONEOK's specific exposure. The company has a high leverage to natural gas liquids (NGLs), and demand for NGLs is closely tied to China's economic performance. According to the CFRA analyst, NGL pricing has been under pressure year-to-date, which contributes to the decision to downgrade the stock.
The revised price target of $97 represents an increase from the previous target of $90. This adjustment indicates that while the firm sees the current stock valuation as high, there is still potential for some growth in the share price based on their analysis.
Investors may consider this rating change as they evaluate their positions in ONEOK and the broader energy sector, particularly in the context of global economic factors and commodity prices.
In other recent news, ONEOK, a key player in the energy sector, has been the subject of several positive adjustments from various analysts following robust financial performance and strategic acquisitions.
Stifel raised its stock price target for ONEOK in response to recent strategic moves, including the acquisitions of Medallion Midstream and a significant stake in EnLink Midstream (NYSE:ENLC). These acquisitions are expected to contribute over $2 billion to ONEOK's long-term EBITDA and increase its free cash flow by approximately 20% by 2028, according to Citi.
Scotiabank also adjusted its outlook on ONEOK, raising the price target due to potential for significant accretion from the large debt component of recent deals and expected consolidation of equity units. The company's strong financial results for the second quarter of 2024, with a significant 28% year-over-year increase in net income, reaching $780 million, were also noted.
RBC Capital Markets and CFRA also adjusted their price targets for ONEOK, raising them based on the company's robust financial performance and potential for increased capital returns. Notably, ONEOK's second-quarter results for 2024 surpassed analyst expectations, prompting these revisions. These are among the recent developments in ONEOK's business operations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.