Jefferies analysts weighed in today on oil pipeline company Energy Transfer Equity LP (NYSE:ETE) and e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN), with positive ratings. While Energy Transfer announced the completion of a 329 million unit private offering of Convertible Preferred Units, Amazon confirmed the signing of a commercial agreement with Air Transport Services Group to lease 20 freighter aircraft for Amazon Fulfillment Services along with operation and logistics services for the fleet. Let’s take a look and see what the analysts have to say about these events.
Energy Transfer Equity LP
Shares of Energy Transfer Equity are dropping 7% after the company announced 32% of units outstanding, the majority of which are controlled by insiders, have effectively elected to defer 60% of distributions for up to nine quarters.
Jefferies analyst Christopher Sighinolfi commented, “We believe this transaction is a first step toward restraining parent-entity cash outflows in an effort to restore the financial health & stability of the ETE-family. However, it is not a guarantee against ETE common unit distribution reductions & presents a potential longer-term dilution to common unitholders. As the conversion analysis offered above indicates, we see the potential for the issuance of ~79mm common units in 2018.”
Furthermore, “The convertible preferred unitholders effectively lock-in a 28.5¢/unit non-cash distribution which will ultimately will fully materialize on the conversion date. Accordingly, as we understand it, if a common unit distribution cut were to occur between now and the conversion date, preferred unitholders have inoculated their exposure and will continue to receive a 11¢ cash distribution & 17.5¢ boost in conversion value each quarter, independent of board approved common unitholder distributions.”
The analyst reiterated a Buy rating on shares of Energy Transfer, with a price target of $19, which implies an upside of 170% from current levels.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Christopher Sighinolfi has a total average return of -10.6% and a 41.3% success rate. Sighinolfi has a -31.5% average return when recommending ETE, and is ranked #3488 out of 3694 analysts.
Out of the 7 analysts polled by TipRanks, 4 rate Energy Transfer Equity stock a Buy, while 3 rate the stock a Hold. With a return potential of 275%, the stock’s consensus target price stands at $26.30.
In addition, Jefferies analyst Brian Pitz reiterated a Buy rating on shares of Amazon, with a price target of $775, following the news that Amazon has completed a deal with Air Transport Services Group to run its own airfreight delivery operation.
Pitz wrote, “We continue to believe that bringing logistics in-house could both strengthen Amazon’s value proposition (ensuring consistent service levels) and cut costs (in the longer term) for its expedited delivery services. We also see such a move as a logical next step in building out Amazon’s fulfillment capabilities.”
The analyst continued, “Along with Amazon’s efforts to build “last mile” capabilities (including Amazon Flex – a Uber-like service for expedited deliveries), air cargo operations would be adding another piece to the puzzle called Amazon fulfillment. This follows a recent announcement by the company that it had acquired and was rolling out thousands of Amazon-branded tractor trailers (albeit not the trucks/drivers who will be 3rd party). It also ties with media reports from October last year claiming that Amazon had hired an executive search firm to help it put together a management team to lead the company’s efforts to build an in-house fulfillment and distribution network.”
According to TipRanks.com, analyst Brian Pitz has a total average return of 12% and a 63% success rate. Pitz has a 31% average return when recommending AMZN, and is ranked #126 out of 3694 analysts.
Out of the 46 analysts polled by TipRanks, 40 rate Amazon stock a Buy, while 6 rate the stock a Hold. With a return potential of 31%, the stock’s consensus target price stands at $733.53.