Consensus ratings for NGLS and TRGP
Of the analysts surveyed by Bloomberg, 47% rate Targa Resources Partners (NGLS) a “buy,” and 53% rate it a “hold.” None of the analysts rate it a “sell.” The consensus target price for NGLS is $37.54. Its shares currently trade near $30.04.
As for Targa Resources (TRGP), 41% of analysts rate it a “buy,” 47% rate it a “hold,” and 12% rate it a “sell.” The consensus target price for TRGP is $70.77. It currently trades at $50.14. If the stock does attain this target price within a year, it would mean a 41% price return for investors. TRGP forms ~3.3% of the Global X MLP & Energy Infrastructure ETF (MLPX).
Broker targets for NGLS and TRGP
The above table shows recommendations and target prices for NGLS and TRGP from some of the brokers surveyed in November 2015. Below are some of the recommendations:
- Credit Suisse (CS) is most optimistic about NGLS with a target price of $49. Goldman Sachs (GS) is least optimistic with a target price of $33. This is still higher than the current market price of the shares.
- Four firms—Morgan Stanley (MS), Raymond James, US Capital Advisors, and Capital One Securities—gave NGLS a target price close to the $37.54 consensus target.
- Morgan Stanley is most optimistic about TRGP with a target price of $85. This would mean a 69% price return in a year. Wunderlich Securities is the most pessimistic about TRGP with a target price of $56. This would still mean a 12% price return for investors.
NGLS shares fell only 1.5% on November 5 compared to November 2, the day before the merger announcement. Its price reaction and analyst recommendations possibly reflect the fact that in this currently challenging environment, there weren’t many options available for the growth-constrained MLP apart from consolidation.
The consensus price target for TRGP also possibly reflects analysts’ positive opinion about the deal in the long run. This seems to contradict the immediate market reaction for the stock. TRGP fell 14% by November 5 compared to its November 2 close.