Shares of natural gas and NGL (natural gas liquids) producers like Antero Resources (NYSE:AR) and EQT Corp. (NYSE:EQT) posted significant gains in 2022. Higher average realized prices, strong demand, and debt reduction drove these stocks higher. However, natural gas prices are trending lower, posing a challenge for these companies. AR and EQT have already reversed some of their gains from their 52-week highs and may decline further due to a plunge in natural gas prices.
A Wall Street Journal report highlighted that abnormally warm weather sapped demand for natural gas. This led to a sharp decline in natural gas prices. The report highlighted natural-gas futures for February, which closed at $4.172 per million British thermal units yesterday. It is about 57% lower than the summer peak.
Lower demand and a decline in prices spell trouble for AR and EQT stocks. Recently, Tudor Pickering analyst Jeoffrey Lambujon downgraded both of these stocks to Hold. The analyst sees weak natural gas prices in 2023 (especially in the second half) and expects supply to outpace demand.
Meanwhile, Siebert Williams Shank & Co. analyst Gabriele Sorbara downgraded EQT stock to Hold, citing concerns regarding its valuation and natural gas prices. The analyst said, “Our reduced natural gas price deck triggers a downgrade to Hold (from Buy) on EQT.”
Is AR a Buy, Sell, or Hold?
On TipRanks, AR stock is a Moderate Buy, reflecting five Buy and two Hold recommendations. Meanwhile, analysts’ average price target of $49.67 implies 69.23% upside potential. Though analysts are cautiously optimistic about AR stock, hedge funds and insiders have reduced their exposure. Last quarter, hedge funds sold 2.3 million AR. Meanwhile, insiders sold $31.4M worth of AR stock last quarter. Overall, Antero has a Neutral Smart Score of five.
What’s the Prediction for EQT Stock?
EQT stock has a Strong Buy consensus rating on TipRanks based on 11 Buys and two Holds. Further, the average price target of $60.36 implies 81.75% upside potential. Similar to AR, hedge funds and insiders reduced their holdings in EQT.
Hedge funds sold 1.8M EQT stock in three months. Meanwhile, insiders sold EQT stock worth $8M. It has a Neutral Smart Score of six.
Bottom Line
AR and EQT stocks gained 77% and 58%, respectively, in 2022. This includes the recent correction. Looking ahead, the slowdown in demand and decline in natural gas prices will likely hurt the financials of AR and EQT. Further, negative signals from hedge funds and insiders and a Neutral Smart Score indicate that the upside in these stocks could be limited.
