Can Plains All American Pipeline Regain Upward Momentum?


Mar. 19 2018, Updated 5:30 p.m. ET

PAA’s moving average

Plains All American Pipeline (PAA) fell below its short-term (50-day) and long-term (200d) moving averages, which might indicate bearish sentiment in the stock. PAA was trading 0.5% below its 50-day SMA (simple moving average) and 1.0% below its 200-day SMA as of March 16. In comparison, PAA’s peers Enbridge Energy Partners (EEP) and Buckeye Partners (BPL) were trading 32.6% and 21.1% below their long-term moving averages.

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An increase in crude oil prices, robust Permian drilling activity, the successful completion of open season for its Cactus II pipeline project, and the company’s clarification on the minimal impact of FERC’s tax ruling could push PAA above its long-term moving average, resulting in bullish sentiment.

Short interest in PAA

Short interest in PAA was 9.3 million shares as of March 16. At the same time, short interest in PAA as a percentage of its float ratio was 2.18%, which is lower than the 30-day average of 2.39%. Moreover, short interest in PAA is lower than the last-one-year average of 2.68%, which indicates bullish sentiment in the stock.

PAA’s forward EV-to-EBITDA

PAA was trading at a forward EV-to-EBITDA multiple of 11.8x as of March 16, which is below the one-year average of 12.5x. However, PAA’s current distribution yield of 5.5% is lower than the one-year average yield of 7.4%—mainly due to the two distribution cuts announced over the past year.

PAA’s current valuation might indicate a buying opportunity, considering the partnership’s strong presence in the prolific Permian Basin, strong earnings growth, improved financial position, and significant expansion opportunities. PAA expects to spend $1.4 billion on growth projects in 2018.


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