Janney Starts Antero Midstream At Buy; Long-Term Outlook Called 'Superior' Amid Drilling Panic

Janney analysts Nathan Judge and Akil Marsh initiated coverage of Antero Midstream Partners LP AM with a Buy rating and a $27.00 fair value estimate on Monday. According to the report, the firm believes the pullback in the stock opens an attractive entry point for long long-term investors seeking for superior returns.

“The uncertainty surrounding drilling schedules and production volumes appears to be at a peak frenzy,” the experts noted. History has proven that investors that buy good assets at moments of uncertainty are usually well rewarded, they continued.

The firm anticipates 26 percent annual distribution growth – this estimate is “underpinned by attractive drilling economics at its sponsor,” Antero Resources Corp AR. Thus, they concluded, said growth with the type of risk that the company offers deserves to yield 3.7 percent, or a fair value estimate of $27.00 per share – which implies an upside of roughly 32 percent from current prices.

Investing In MLPs

In the research note, Judge and Marsh pointed out that the performance of MLP stock have been correlated to oil prices over the past year. This means that a tumble in oil prices usually triggers a drop in MPL stock prices – including Antero.

In addition, the experts recommended that “retail clients consult with a tax accountant prior to investing in any MLP. Unit holders will receive a K-1, which allocates each limited partner's pro-rata share of pass-through income and expenses. This can both delay and complicate tax filings. In addition, MLPs are not usually suitable for most tax-exempt investment vehicles, like IRAs,” they explicated.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.