APA Group has been downgraded by JPMorgan from an “overweight” rating to “neutral”, citing a fully priced valuation on the sharemarket. APA Group owns and operates an extensive network of gas pipelines across Australia, delivering natural gas to homes and businesses. It also has investments in electricity transmission assets.
JPMorgan energy analyst Nick Morgan indicated that APA’s growth capital spending budget is expected to face delays. This is due to full order books and extended lead times for crucial equipment such as gas turbines, which are expected to persist for much of the remaining decade. The analyst’s commentary suggests that the deployment of capital for growth projects may take longer than initially anticipated by the company.
Shares in APA recently reached their highest level in over a year. The current share price is nearly on par with JPMorgan’s 12-month price target of $8.80. This proximity to the target price further supports JPMorgan’s rationale for the downgrade, as the upside potential appears limited at the current valuation.
