On Monday, BMO (TSX:BMO) Capital Markets adjusted its outlook on EQT Corporation (NYSE:EQT (ST:EQTAB)) shares, a player in the energy sector, by increasing its price target to $47 from the previous $40, while reaffirming an Outperform rating on the stock. The revision follows a recent meeting with EQT's management team.
The firm's analysts highlighted EQT as a compelling story within the exploration and production (E&P) space, noting that the company's stock price presented a valuable opportunity for investors following its acquisition of ETRN. The acquisition's aftermath has been seen as a chance to buy into the company at an advantageous price point.
EQT's enhanced cost structure was cited as a factor that provides both resilience during various phases of the natural gas cycle and potential for significant upside. The company's engagement in data center and artificial intelligence (AI) initiatives adds a thematic layer to its investment narrative, which the firm found noteworthy.
Moreover, BMO Capital Markets recognized a clear strategy for EQT to reduce its debt through asset sales and the generation of strong free cash flow (FCF) in both the short and long term. This financial strategy is anticipated to support the higher price target set by the firm.
The analyst's statement from last week underscored the potential for EQT's stock, "Improved cost structure provides resilience and upside optionality through the natural gas cycle, while data center/AI provides a thematic element for the story. Also, we see a viable path towards pro-forma deleveraging via divestitures and strong FCF near and long term, which supports an increase in our target price to $47."
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