On Friday, Wells Fargo (NYSE:WFC) adjusted its stance on EnLink Midstream, LLC (NYSE: NYSE:ENLC) stock, moving its rating from Overweight to Equal Weight. Accompanying this change, the firm also set a price target for the company's shares at $15.00.
The adjustment by Wells Fargo comes with expectations of a buyout offer for EnLink Midstream. The anticipated offer is projected to be around $14.90 per share by the first quarter of 2025. This potential buyout price suggests an annualized return of 8% from the current level.
Wells Fargo's valuation of EnLink Midstream reflects a belief that the expected takeover price is fair. The price target of $15.00 is based on a 9.1 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio, which is slightly below the firm's own valuation of EnLink at 9.3 times EV/EBITDA.
Shareholders of EnLink Midstream could see additional benefits if the buyout materializes. Specifically, there is an anticipated income increase of approximately 20% in 2025 for the holders of ENLC stock, as noted by Wells Fargo in its analysis.
The price target and rating change reflect Wells Fargo's current perspective on EnLink Midstream's value and future prospects within the market. The firm's analysis points to a significant event in the near future that could impact shareholder value.
In other recent news, EnLink Midstream experienced a significant shift in its corporate structure. The company was downgraded from Buy to Hold by a Stifel analyst following the announcement of an agreement with ONEOK (NYSE:OKE), Inc. and Global Infrastructure Partners (GIP).
As part of the agreement, ONEOK will acquire a controlling interest in EnLink Midstream and all of GIP's interest in Medallion Midstream. The transaction, expected to close in the fourth quarter of 2024, marks a significant expansion of ONEOK's midstream services.
Simultaneously, EnLink Midstream finalized an agreement for a public offering of $500 million in senior notes, guaranteed by its subsidiary, EnLink Midstream Partners, LP. The proceeds from this offering are intended for general corporate purposes, including debt repayment.
In terms of financial performance, EnLink Midstream reported a robust second quarter in 2024, with $306 million in adjusted EBITDA and a repurchase of $50 million of its units. The company also launched a third processing plant in the Permian and expanded its natural gas storage assets in Louisiana.
Analysts have noted the company's resilience, with a strong hedge in place for the commodity portion of the business. EnLink Midstream expects a stronger performance in the second half of 2024, particularly in the fourth quarter, due to the anticipated seasonal strength of its Louisiana NGL business.
InvestingPro Insights
Recent data from InvestingPro shows that EnLink Midstream, LLC (NYSE: ENLC) has a market capitalization of approximately $6.61 billion, indicating its significant presence in the industry. With a current P/E ratio of 44.54 and an adjusted P/E ratio for the last twelve months as of Q2 2024 at 38.4, the company is trading at a high earnings multiple, which could be a reflection of investor confidence in its future profitability. This aligns with the analysts' predictions that EnLink Midstream will be profitable this year.
InvestingPro Tips suggest that EnLink Midstream has experienced a strong return over the last three months, with a 17.56% total price return, which may be of interest to investors looking for growth potential. Additionally, the company has maintained dividend payments for 11 consecutive years, offering a current dividend yield of 3.68%, which could appeal to income-focused investors. For those interested in further insights, InvestingPro provides additional tips that can be found at https://www.investing.com/pro/ENLC.
The company's stock price movements have been quite volatile, which is an important consideration for investors who prioritize stability. Despite this, EnLink Midstream is trading near its 52-week high, at 97.3% of the peak price, indicating strong market sentiment. These metrics and tips can provide a deeper understanding of the company's financial health and market position, complementing the recent analysis by Wells Fargo.
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