Analyst Note
| Stephen Ellis |After updating our model to better model out product margins and Grand Prix contributions, Targa's updated 2021 outlook, and the expected Stonepeak transaction, we are increasing our fair value estimate to $48 per share from $45 per share. Our valuation implies a 2021 enterprise value/EBITDA multiple of 9.1 times and a 2022 EBITDA multiple of about 8 times. Targa’s third-quarter results were strong, as ongoing strength in Permian gathering and processing volumes were boosted by high commodity prices. The firm now expects to exceed the top end of its 2021 EBITDA guidance range of $1.9 billion to $2 billion, and we've updated our forecast to $2.04 billion. We consider the benefits from wider marketing spreads and higher commodity prices to be more temporary given the particularly strong environment for gas.