Stifel Upgrades DT Midstream Amid Market Pullback Opportunity
Stifel Upgrades DT Midstream Amid Market Pullback Opportunity
Stifel analyst Selman Akyol has taken a bullish stance on DT Midstream, Inc. (NYSE: DTM), upgrading the stock to a Buy rating from Hold, with an updated price target of $106, up from the previous $89. This upgrade signals confidence in DT Midstream's growth trajectory.
Analyst Perspective on Stock Pullback
Akyol observes that the recent pullback in DT Midstream's stock price presents a compelling opportunity for investors looking to capitalize on its potential. Following the announcement of a significant natural gas pipeline acquisition, DT Midstream is positioning itself as a key player in the natural gas infrastructure sector.
Strategic Acquisition and Financial Impact
This acquisition is expected to boost DT Midstream's EBITDA beyond the $1 billion mark, expanding its customer base. Such growth increases the possibility that the company could achieve an upgrade to investment grade status from S&P in the near future. The analyst believes that the expected closure of this pipeline acquisition will occur at the beginning of 2025, with the new assets generating an EBITDA multiple of 10.5x, translating to around $115 million.
EBITDA Contribution Forecasts
With this acquisition, pipeline EBITDA is projected to constitute about 66% of the analyst's EBITDA estimates for 2025, an increase from 62%. Furthermore, while Akyol anticipates a rise in year-end 2025 leverage from 3.4x to 3.7x, he considers this manageable due to the stable, long-term contracts associated with the acquired assets.
Free Cash Flow Growth
Adding to the positive outlook, the analyst expects free cash flow post-dividends to see an increase, projecting it to reach approximately $240 million, compared to a previous estimate of $195 million. This improvement reflects the solid financial health anticipated from the acquisition and the overall operational efficiency of the company.
Investment Opportunities in ETFs
For investors seeking exposure to DT Midstream, two noteworthy exchange-traded funds (ETFs) to consider are the Invesco S&P Spin-Off ETF (CSD) and the Alerian Energy Infrastructure ETF (ENFR). These funds provide diversified access to energy infrastructure investments, capturing the growth potential of DT Midstream and similar companies.
Current Market Performance
As of the latest trading session, DT Midstream shares have appreciated by 3.31%, with the stock priced at $98.53. Investor sentiment appears to be shifting in favor of DTM, bolstered by the recent analyst upgrade and strategic developments within the company.
Frequently Asked Questions
What recent changes did Stifel make regarding DT Midstream's rating?
Stifel upgraded DT Midstream from Hold to Buy and raised the price target from $89 to $106.
What strategic acquisition is DT Midstream pursuing?
DT Midstream is acquiring a natural gas pipeline, which is expected to significantly boost its EBITDA and customer base.
What is the expected EBITDA post-acquisition?
The acquisition is projected to increase DT Midstream's EBITDA beyond $1 billion.
How will the acquisition impact DT Midstream's cash flow?
The free cash flow after dividends is expected to rise to approximately $240 million, up from $195 million.
How can investors gain exposure to DT Midstream?
Investors can gain exposure through ETFs such as the Invesco S&P Spin-Off ETF (CSD) and the Alerian Energy Infrastructure ETF (ENFR).
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