On Monday, Goldman Sachs updated its outlook on Kinetik Holdings, Inc. (NASDAQ:KNTK), increasing the price target to $40 from the previous $38, while reiterating a Buy rating for the stock. The adjustment follows Kinetik's fourth-quarter results for 2023, which demonstrated strong performance and positive guidance for 2024.
The company's resilience has been highlighted in a challenging gas price environment, with Kinetik being recognized for its position as a distinct pure-play on growth in the Permian region. Although growth rates have moderated compared to previous years, Kinetik is still finding opportunities to expand, particularly by aiming to capture more market share in the Northern Delaware area.
Goldman Sachs noted Kinetik's low capital expenditure guidance and the management's commitment to staying within this range. This approach is expected to significantly increase the company's free cash flow in 2024. This financial strategy is anticipated to help Kinetik achieve its leverage target of 3.5 times and potentially increase returns to shareholders, including the possibility of share buybacks in the fourth quarter of 2024.
The investment firm has also raised its EBITDA estimates for Kinetik by approximately 2%, which has contributed to the new price target. The revision is further supported by the belief that Kinetik remains an attractive acquisition target amidst ongoing mergers and acquisitions in the midstream sector.
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