On Tuesday, Piper Sandler adjusted its price target for Delek US Holdings, Inc. (NYSE:NYSE:DK), a diversified downstream energy company, from $31.00 to $30.00 while maintaining a Neutral rating on the stock. The revised price target is informed by a sum-of-the-parts (SOTP) valuation for the fiscal years 2024 and 2025.
The valuation approach applied by Piper Sandler uses a blended forward-looking EBITDA multiple. Specifically, the firm utilizes a 3.0x multiple for the refining sector, 7.0x for retail, and 7.0x for logistics, excluding the master limited partnership (MLP). Additionally, a corporate blended multiple of 6.0x is used in the analysis.
The holdings in the underlying MLP are valued at current market prices, with a 20% liquidation discount factored in due to Delek US's substantial 80% ownership of Delek Logistics Partners, LP (NYSE:DKL). The SOTP equity value is further discounted by 25%, as stated by Piper Sandler.
In the statement provided, Piper Sandler made it clear that no option value was included for the Bakersfield Biorefinery within the valuation, citing a lack of clear visibility on potential accretion from this asset. The adjustment in Delek US's price target reflects the firm's detailed evaluation of the company's various business segments and ownership interests.
InvestingPro Insights
Piper Sandler's recent price target adjustment for Delek US Holdings, Inc. (NYSE:DK) corresponds with some of the real-time metrics and InvestingPro Tips that suggest a complex outlook for the company. With a market capitalization of $1.74 billion, Delek's valuation reflects a negative P/E ratio of -23.19, indicating that investors are anticipating future profitability despite recent losses. This aligns with the InvestingPro Tips that net income is expected to grow this year, and analysts predict the company will turn profitable within the same timeframe.
Delek's revenue has seen a decline of 17.71% over the last twelve months as of Q1 2024, which may be a point of concern as analysts anticipate a sales decline in the current year. However, the company is trading at a low revenue valuation multiple, which could be seen as an opportunity for value investors. Additionally, Delek offers a substantial dividend yield of 3.64%, and its dividend growth over the last twelve months stands at 13.64%, potentially attracting income-focused shareholders.
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