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On Tuesday, Wells Fargo adjusted its stance on Equitrans Midstream Corp. (NYSE:), upgrading the stock from Underweight to Equal Weight and increasing the price target to $12.00, up from the previous $10.00. The revision comes in response to a proposed merger with EQT Corporation (NYSE:), which has influenced the new valuation.
The analyst from Wells Fargo highlighted that despite the recent sell-off in EQT (ST:)’s stock, the deal remains attractive. The bid from EQT suggests a takeout offer for Equitrans Midstream at $12 per share, which is higher than the analyst’s prior price target of $10 per share and above their sum-of-the-parts (SOTP) derived valuation of $7 per share. The upgrade to Equal Weight and the raised price target are reflective of the potential merger terms.
Wells Fargo’s revised price target is driven by the proposed exchange ratio in the merger, which is set at 0.3504 EQT shares for every share of Equitrans Midstream. This exchange rate is based on EQT’s current share price. The new price target of $12 per share implies an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple for the year 2025 estimated at 10.2 times.
Using the last closing price of EQT’s stock before the deal announcement on March 8, 2024, Wells Fargo estimates the merger consideration for Equitrans Midstream would be approximately $13.15 per share, resulting in an EV/EBITDA multiple of 10.6 times.
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This story originally appeared on Investing
