Key Points
Despite the fairly deep cut, he maintained his hold recommendation.
He cited higher-than-average storage rates as a key reason for this.
Natural gas company Gulfport Energy (NYSE: GPOR) wasn't providing much energy for its investors on Friday. Many of those folks were dissuaded by a bearish adjustment made by an analyst that morning and sold out of their stock, leaving it with a more than 5% loss that trading session.
Gloomy on gas?
Truist Securities' Gabe Daoud cut his price target on Gulfport to $190 per share, some distance down from his previous fair value assessment of $219. That didn't change his overall view of the stock, as he maintained his hold recommendation.
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According to reports, Daoud's adjustment was part of a broader reevaluation of the natural gas exploration and production segment of the energy sector. His estimate for gas storage -- a crucial yardstick for pricing -- as of the end of this coming October anticipates it'll be 4% above the five-year norm. Typically, a higher volume of stored gas means lower sale prices.
Daoud did wax bullish about future periods, writing that 2028 and 2029 could see notably lower storage levels (and, therefore, higher prices for companies like Gulfport).
Yet another surge in crude
Another factor that's sure to affect natural gas prices is -- once again -- the rising price of crude oil, due largely to the recent flare-up in the Iran war. Typically, when crude increases, gas prices slide. The war will probably drag on for some time, so given that dynamic and the storage situation described by the analyst, I'd probably avoid natural gas equities for now.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Truist Financial. The Motley Fool has a disclosure policy.