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.
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.
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.
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.