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Morgan Stanley Raises Teekay's Price Target To $8, Says 'Gaining Time Until Market Recovers'

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Morgan Stanley Raises Teekay's Price Target To $8, Says 'Gaining Time Until Market Recovers'

Morgan Stanley’s Fotis Giannakoulis believes Teekay Corporation (NYSE: TK) “continues to enjoy strong support from its lenders and its major shareholder that are willing to provide additional capital to deal with the funding gap from its $4.6 billion capex.”

Giannakoulis maintains an Equal-Weight rating on the company, while raising the price target from $7 to $8.

Funding Gap And Initiatives

The analyst mentioned that Teekay Offshore Partners L.P. (NYSE: TOO) was close to completing its capitalization plan, which was expected to improve liquidity while deferring any funding gap to after 2017.

Although the plan reduced the risk of credit securities, it adds pressure to Teekay Offshore’s stock.

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On the other hand, the funding gap for Teekay LNG Partners L.P. (NYSE: TGP) appears to be narrowing, with management expecting high new-build financing.

“These transactions improve creditors position and provide near-term liquidity relief, in anticipation of a market recovery. There is still a heavy financing burden, which will require additional equity, in our view,” Giannakoulis stated.

Risks

However, the analyst also noted that Teekay Offshore continued to have the highest exposure in the group to high dilution risk, given its expiring offshore contracts, large debt maturities and aging assets.

“TGP may also have to issue modest amounts of equity to fund its newbuilds, but less than previously anticipated,” according to the Morgan Stanley report.

Latest Ratings for TK

DateFirmActionFromTo
Oct 2018Initiates Coverage OnBuy
Aug 2018TerminatesHold
Jun 2018MaintainsUnderweightUnderweight

View More Analyst Ratings for TK
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