Teekay Tankers, one of the largest tanker owners and operators in the world, reported a massive $4.84 per share in free cash flow in Q4 of last year, due to the highest shipping rates ever recorded. The Canada-based Oil, Gas & Consumable Fuels company, with a market cap of $1.5 billion, also reported exceptionally strong revenue of $367 million, over $155 million above consensus. Bank of America Global Research expects earnings to surge this year amid favorable shipping rates, while the Bloomberg consensus forecast shows growth in earnings ahead.
Despite global supply chain easing, Teekay Tankers (NYE:TNK) has potential upside due to technical momentum and a value case. However, the company is highly exposed to spot rate prices, which can go through booms and busts. Furthermore, if OPEC cuts oil production, that would be a downside risk to Teekay. Nonetheless, the company is taking steps to reduce its debt burden and show capital discipline.
With a historically normal 5x EV/EBITDA for the stock, shares might have 20% more upside, and a long play on momentum works, with a prudent play being to add to it on a dip into the upper $30s. The technical analysis suggests that the stock has a support range in the $26 to $27 range after basing in the high single digits, with resistance in the $60s.
Investors should approach Teekay with caution as it is a highly volatile small-cap name in a risky industry. A position should be smaller compared to other more blue-chip stocks.
Teekay Tankers Ltd. Stock Analysis:
According to forecasts from three analysts, the average target price for Teekay Tankers Ltd stock over the next 12 months is USD 45.00. The average analyst ratings for the stock is Strong Buy. Stock Target Advisor has conducted its own analysis and considers Teekay Tankers Ltd to be Slightly Bullish based on 10 positive signals and 5 negative signals. Teekay Tankers Ltd’s stock price was USD 43.32 at the last closing, and has experienced significant increases of +15.21% over the past week, +52.00% over the past month, and +215.51% over the past year.
Teekay Tankers Ltd. is a Canadian company that offers marine transportation services to oil industries worldwide. They provide voyage and time charter services, offshore ship-to-ship transfer services, tanker commercial and technical management services, and own and lease 48 double-hull oil tankers, two Aframax tankers, and one LR2 tanker. The company was founded in 2007 and is headquartered in Hamilton, Canada.