Goldman Sachs raises Kodiak Gas Services stock target

On Wednesday, Goldman Sachs adjusted its price target on shares of Kodiak Gas Services Inc (NYSE:KGS), increasing it from $27.00 to $31.00 while maintaining a Buy rating. The revision comes in the wake of Kodiak's recent acquisition of CSI Compressco (NASDAQ:CCLP) on April 1, 2024, which has significantly expanded the company's operational capacity.

The acquisition added a substantial amount to Kodiak's fleet, boosting it by one-third. Goldman Sachs sees this as a strategic move that allows Kodiak to enhance its utilization and profit margins by leveraging its top-tier business model. The firm's revised estimates for Kodiak's financial outlook are closely aligned with the projections provided in the S-4 filings for the years 2024 and 2025, albeit they are more conservative for 2026 and 2027.

Despite the conservative long-term estimates, the analyst anticipates that the risks to these projections are more likely to be on the upside. This optimism is based on the expectation that more details will emerge about the CCLP contract portfolio, the integration of the new units, and any related capital expenditures. Goldman Sachs' estimates are significantly higher than the consensus, with an average of approximately 14% for the period from 2024 to 2027.

Kodiak's stock has shown strong performance, registering a year-to-date increase of 37%, which outpaces the 33% gain of its closest peer. While the overall natural gas compression industry's favorable conditions have contributed to this growth, Goldman Sachs believes that the market has not fully priced in the potential benefits of the recent acquisition. The new price target of $31 is based on a 7.25x target multiple applied to the firm's 2025 EBITDA estimate.

As Kodiak Gas Services Inc (NYSE:KGS) continues to make strategic moves, real-time data from InvestingPro shows promising figures that could interest investors. The company's market capitalization stands at a robust $2.31 billion, indicating a strong presence in the market. Moreover, with a high revenue growth of 20.13% over the last twelve months as of Q4 2023, Kodiak's acquisition strategy seems to be paying off. The stock's performance is also noteworthy, with a significant 83.73% return over the last year, aligning with the positive sentiment expressed by Goldman Sachs.

InvestingPro Tips highlight that Kodiak is trading at a high earnings multiple, with a P/E ratio of 89.03, which suggests that the market has high expectations for the company's future earnings. Additionally, the stock trades with low price volatility, providing a level of stability for investors. For those looking to dive deeper into Kodiak's financials and stock performance, InvestingPro offers additional tips and metrics. With the use of coupon code PRONEWS24, investors can get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to a wealth of information, including 7 more InvestingPro Tips for Kodiak.

Get The App

Join the millions of people who stay on top of global financial markets with Investing.com.

Download Now

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.