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Argus predicts 17% surge for pipeline stock due to higher natural gas prices and coal phaseout



Williams Companies, a pipeline operator, provides investors with an opportunity to capitalize on the rising demand and prices of natural gas. Research firm Argus recently upgraded Williams to a buy rating with a price target of $47 per share, indicating a potential 17% upside from the closing price on Tuesday. Analyst Bill Selesky cited the firm’s bullish outlook on natural gas prices as the main reason for the upgrade. Demand for natural gas is expected to increase due to hot weather conditions, the transition from coal to gas, and limited supply, resulting in low inventories. Williams operates a vast gas pipeline network in the U.S., spanning over 30,000 miles and connecting crucial supply sources to key demand regions.

The stock of Williams hit a 52-week intraday high of $42.60 on Thursday, marking a nearly 22% increase since the beginning of the year. The surge in the company’s stock price is attributed to the 70% rebound in natural gas prices over the past two months. Following a low of $1.482 per thousand cubic feet in April, natural gas prices climbed to $3.09 per thousand cubic feet on June 10 due to increased electricity demand driven by the early summer heat wave. Gas production is projected to decline by 1% in 2024 due to the recent period of very low prices, according to the Energy Information Administration.

Jenny Harrington, CEO of Gilman Hill Asset Management, praised Williams as a strong company benefiting directly from the growing demand for energy and power. Harrington highlighted the appeal of the midstream sector, including companies like Williams, due to reduced exposure to commodity price fluctuations. Wells Fargo also upgraded Williams to overweight earlier this month, setting a price target of $40.98, which implies a 10% upside, or 14.6% when factoring in the dividend yield. The firm predicts a surge in natural gas demand over the coming decades driven by factors such as increased electricity demand from artificial intelligence, the revival of manufacturing in the U.S., and the transition to electric vehicles.

Williams CEO Alan Armstrong emphasized the favorable market conditions for utilities looking to secure natural gas supply amid low prices. Armstrong highlighted the increasing reliance on natural gas for power generation, as well as the growth in LNG exports, data centers, and the trend towards electrification and reshoring. Wall Street analysts are largely bullish on Williams, with half rating the stock as a buy, 45% recommending a hold, and only 4.5% suggesting a sell. Despite an average price target of $41.89, Williams’ stock closed at $42.40 on Thursday, outpacing the projections. The company’s strategic positioning in the energy sector and the anticipated growth in natural gas demand make it an attractive investment opportunity for those looking to capitalize on the transition to cleaner energy sources.

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