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Targa Resources Corp TRGP

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Increasing Targa's FVE to $48 After Improving Modeling of Grand Prix and Product Margins

Stephen Ellis Sector Strategist

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. 

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Company Profile

Business Description

Targa Resources is a midstream firm that primarily operates gathering and processing assets with substantial positions in the Permian, Stack, Scoop, and Bakken plays. It has 813,000 barrels a day of gross fractionation capacity at Mont Belvieu and operates a liquefied petroleum gas export terminal. The Grand Prix natural gas liquids pipeline recently entered full service.

811 Louisiana Street, Suite 2100
Houston, TX, 77002
T +1 713 584-1000
Sector Energy
Industry Oil & Gas Midstream
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 2,372