Baird Sees Antero Midstream As An 'Undervalued Long-Term Growth' Play; Upgrades To Outperform

Baird's Ethan Bellamy upgraded Antero Midstream Partners LP (NYSE: AM) to Outperform, raising the target price to $38.00.

After dinner with management, the analyst constructed a high degree of conviction on long-term volume growth "which underpins the 30% CAGR in distributions we expect through 2018." The analyst thought tightening oil and gas supply in combination with high guidance of volume growth, would lead to a base case rather than a bear case.

Additionally, the analyst was impressed with Antero's option it exercised to purchase a "15% non-op equity interest in the Stonewall gathering pipeline."

"Stonewall came on-line on 12/1/15 with 1.4 Bcf/d of capacity, allowing Antero Resources (NYSE: AR) to move gas production to markets priced more favorably than Dominion South," said Bellamy.

Antero Midstream Partners closed at $24.13, down 2.2 percent.