In a report released yesterday, Praneeth Satish from Wells Fargo maintained a Sell rating on South Bow Corp, with a price target of C$34.00.
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Praneeth Satish has given his Sell rating due to a combination of factors impacting South Bow Corp’s financial outlook. Despite raising the price target to C$34 per share, the valuation remains a concern. The company’s dividend yield of 7.2% is not expected to grow in the near term, and the total return proposition of 7.8% is significantly below the median for its mid-cap peers, which stands at 13.2%.
Additionally, South Bow Corp’s trading at a premium with an EV/EBITDA multiple of 10.2x compared to the median of 8.8x for similar companies further supports the Sell rating. The company also faces potential financial impacts from the MP 171 incident, with costs estimated at $60 million, although insurance is expected to cover most of it. These factors, combined with the unchanged EBITDA guidance and a slight delay in the root cause failure analysis, contribute to the cautious stance on the stock.
SOBO’s price has also changed slightly for the past six months – from C$35.920 to C$38.320, which is a 6.68% increase.