We recently published a list of 9 Best AI Energy Infrastructure Stocks to Buy Now. Since Targa Resources Corp (NYSE:TRGP) ranks 7th on the list, it deserves a deeper look.
Rob Thummel, senior portfolio manager at Tortoise Capital Advisors, while talking to CNBC in a latest program, said that he sees a big opportunity for AI in the energy industry. Thummel said that while everybody keeps talking about technology infrastructure when it comes to AI, they “forget” about energy infrastructure.
Thummel said that AI will create electricity demand that will in turn fuel the need for natural gas.
“There is no AI without EI (energy infrastructure) because you need this critical infrastructure to provide the fuel to keep their lights on and electricity flowing 24 hours a day.”
Talking about energy stocks, Thummel said a lot of them are “pretty simple stories” as they generate a lot of cash flows and return a significant portion of it back to shareholders.
Asked about the cyclical nature of the industry, Thummel said that global energy demand is currently at its peak and has grown for 38 years over the last four decades. The analyst said the demand for energy increases every year across the world. Thummel said the US has become the largest energy exporter and he does not see that changing for a long time.
Thummel also shared some of his top picks in the energy sector. For this article we scanned his portfolio and chose his top AI energy infrastructure picks. With each stock we have mentioned the total number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Targa Resources Corp (NYSE:TRGP)
Number of Hedge Fund Investors: 38
Texas-based midstream energy infrastructure corporation Targa Resources Corp (NYSE:TRGP) is one of the top AI energy infrastructure stock picks of Tortoise Capital Advisors. The company is one of the largest infrastructure companies delivering natural gas and natural gas liquids in the US.
Last month, Argus started covering the stock with a Buy rating and $140 price target. Targa Resources Corp (NYSE:TRGP) has strong project backlog and plans to buy back shares. Argus analyst John Staszak expects the company’s EBITDA will exceed management’s $3.7B-$3.9B guidance, driven by strong production in the Permian Basin.
The analyst said many of Targa Resources Corp (NYSE:TRGP) assets are focused on some of the most productive U.S. oil and gas formations and connected with important natural gas liquids facilities.
Targa Resources Corp (NYSE:TRGP) is a key player in the energy transportation industry which is expected to grow at a CAGR of about 5.9% through 2030, according to a report by Research and Markets.
During the last quarter of 2023, Targa Resources Corp (NYSE:TRGP) adjusted EBITDA jumped 14% to $959.9 million. In the Permian, natural gas throughput climbed 11% to 5.3 Bcf/d, and NGL throughput jumped 15% to 708.9 MBbl/d. The company generated about $709.7 million in distributable cash flow for the quarter and $2.62 billion for the year. Free cash flow was $73.7 million for the quarter and $392.7 million for the year.
Wall Street expects Targa Resources Corp (NYSE:TRGP) revenue to grow by 14% next year, while earnings are expected to rise 44% next year and 36% over the next five years on a per-annum basis. Based on these growth estimates, the stock’s forward P/E 26.5 isn’t outlandishly high.
Overall, Targa Resources Corp (NYSE:TRGP) ranks 7th on Insider Monkey’s list titled 9 Best AI Energy Infrastructure Stocks to Buy Now. While we acknowledge the potential of Targa Resources Corp (NYSE:TRGP), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TRGP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.