Shares of Enbridge (NYSE:ENB) rose more than 5% by 2:30 p.m. EST on Tuesday. Fueling the oil stock‘s rally was a string of fairly positive analysts’ notes following its solid third-quarter results last week.
Several analysts put out updated price targets on Enbridge’s stock today after refreshing their models to incorporate the Canadian energy infrastructure company’s third-quarter results. On the one hand, each one of them slightly reduced their price targets:
- RBC Capital: from 58 Canadian dollars to CA$52 ($46.50 to $39.98).
- National Bank: from CA$56 to CA$55 ($43.06 to $42.29).
- Stifel: from CA$61 to CA$59 ($46.90 to $45.37).
- TD Securities: from CA$57 to CA$53 ($43.83 to $40.75).
However, they also maintained their buy or outperform rating on the stock. That’s because shares currently trade at right around CA$39 ($30) apiece even after today’s bump, implying that there’s still 33% to 51% upside from their revised price targets.
These analysts are still bullish on Enbridge because it reported solid third-quarter results, which has it on track to achieve the midpoint of its original full-year cash flow outlook. That’s fairly impressive considering all the turmoil in the oil market this year. Meanwhile, the company expects to grow its cash flow per share at a 5% to 7% annual pace through at least 2022, fueled by the CA$11 billion ($8.5 billion) of commercially secured expansion projects it has in the backlog, powered in part by several offshore wind projects.
While most of the analysts who follow Enbridge are slightly toning down their bullishness on the stock’s upside, they still believe the market has significantly undervalued its shares, given the stability of its cash flow and its growth prospects. Because of that, they believe the stock is a buy as it has the potential to outperform the market from here. Add in its nearly 8%-yielding dividend, and the total return could be significant if Enbridge continues rallying.