Please ensure Javascript is enabled for purposes of website accessibility

Why EnLink Midstream Stock Jumped 13% on Monday

By Reuben Gregg Brewer – Jun 15, 2020 at 4:57PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

After starting the day in the red, EnLink investors got some good news and the shares rallied strongly.

What happened

Shares of midstream-focused EnLink Midstream (ENLC 3.33%) started June 15 off in the loss column, as did much of the market and, particularly, the energy sector. At one point in early trading the stock was lower by as much as 6.5%. However, that quickly changed, with the stock eventually rising nearly 16% in the early afternoon. By roughly 3:30 p.m. EDT EnLink's shares had settled into a roughly 13% gain. 

So what

Early in the day, investors were in a "risk off" mood. Nothing was going to dissuade Wall Street from punishing U.S. oil-related names as the price of West Texas Intermediate (WTI, a key U.S. benchmark) was lower by around 5% when the stock market opened. But investors' increasingly mercurial moods shifted and oil regained its losses...and then some. WTI was up by around 2.2% at 3:30 p.m. EnLink's share price, which tracked fairly closely with WTI on the downside, far outstripped it on the upside.

An oil pipeline with a man welding

Image source: Getty Images.

The broad reversal in the mood on Wall Street appears to have opened the door for investors to get excited about a target-price update from RBC Capital Markets. The new target from RBC for EnLink is $5 per share, notably higher than EnLink's price of roughly $3.40 per share at 3:30 p.m. Still, the ups and downs show just how powerful investor sentiment is in today's highly volatile market. A stock can sink or fly on a bit of news.  

Now what

Step back from today's fireworks, however, and EnLink is a midstream company that has cut its dividend in each of the last two quarters. That's not a particularly good backdrop for an investment, especially since there are plenty of other midstream stocks that have not cut their disbursements. Most investors should look past the price swings and the news here to dig into the business fundamentals. For example, in the company's first quarter earnings release it makes reference to preserving balance sheet strength so it can remain within debt covenants. That's not a positive sign for anyone who owns the stock, which ranks below bonds in the capital structure.  

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

EnLink Midstream, LLC Stock Quote
EnLink Midstream, LLC
ENLC
$8.37 (3.33%) $0.27

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
327%
 
S&P 500 Returns
105%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.