Antero Midstream Holds Steady: Balanced Prospects and Current Valuation Lead to Neutral Rating

In a report released today, John Mackay from Goldman Sachs reiterated a Hold rating on Antero Midstream (AM – Research Report), with a price target of $13.50.

John Mackay has given his Hold rating due to a combination of factors surrounding Antero Midstream’s recent financial performance and future prospects. The first quarter of 2024 was marked by steady operations, as the company showed resilience in its volume and cash flow, even amid a challenging natural gas market. The robust prices for natural gas liquids (NGL) have underpinned Antero Midstream’s drilling programs, thanks to its affiliation with Antero Resources. Despite the positive indications, the benefits of such solid execution, including the company’s deleveraging efforts and anticipated share buyback program, appear to be fully reflected in the current stock price.
Mackay anticipates that Antero Midstream will achieve its leverage target, signaling a healthier balance sheet, by mid-2024 and will kick off its stock repurchase program in the third quarter of the same year. These factors contribute to a more favorable outlook for the company. Nevertheless, the improvements and the expected capital returns seem to be already factored into the stock’s valuation, leaving limited upside for new investors. Consequently, Mackay has slightly raised the price target to $13.50 from $13, accounting for a modest increase in the related stock multiple, yet maintains a Neutral stance, implying that the stock should perform in line with the broader market or sector averages.

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Antero Midstream (AM) Company Description:

Antero Midstream Corp. owns, operates and develops midstream energy assets to service Antero Resources production and completion activity. It operates through the following segments: Gathering and Processing and Water Handling. The Gathering and Processing segment includes a network of gathering pipelines and compressor stations that collect and process production from Antero Resources wells in West Virginia and Ohio. The gathering and processing segment also includes equity in earnings from the Company’s investments in the Joint Venture and Stonewall. The Water Handling segment includes two independent systems that deliver fresh water from sources including the Ohio River, local reservoirs and several regional waterways. The company was founded on September 23, 2013 and is headquartered in Denver, CO.