Wells upgrades three natural gas stocks on AI-driven demand

Wells Fargo analyst Michael Blum upgraded DT Midstream (DTM), Kinder Morgan (KMI) and Williams (WMB) to Overweight from Equal Weight with price targets of $77, $22 and $46, respectively. The analyst sees continued multiple expansion for natural gas midstream stocks driven by growing gas demand supported by artificial intelligence, re-shoring and liquified natural gas. The firm projects the average multiple for these stocks to increase to 10.5-times from 9.5-times. Gas pipeline valuations de-rated partly due to investor concern that renewables would cannibalize long-term demand for natural gas, according to Wells. However, the firm says that with the U.S. power market poised for “rapid growth,” natural gas demand will grow over next few decades alongside renewables. Wells believes natural gas stocks have “more room to run.”