Is April a good month for buying MPLX shares?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the outdoors, enjoys… read more.
on Mar 27, 2021
  • MPLX will start to buy back shares since the company's stock seems "undervalued"
  • The dividend yield is 10.7% at the current share price
  • MPLX will continue to focus on investments in projects that would deliver the highest returns

MPLX (NYSE: MPLX) shares have been moving in an uptrend last several months, and according to technical analysis, a positive trend remains intact. The dividend yield is 10.7% at the current share price, and the shares of this company remain attractive for long-term-oriented investors.

Fundamental analysis: MPLX will start to buy back shares since the company’s stock seems “undervalued”

MPLX (MPLX) is a natural gas company that owns and operates crude oil and natural gas gathering systems and pipelines as well as natural gas and natural gas liquids (NGL) processing and fractionation facilities in key U.S. supply basins.

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MPLX reported Q4 results last month; total revenue has decreased by -3% Y/Y to $2.25B while Q4 GAAP EPS was $0.63 (missed by $0.01). Total revenue has decreased below expectations while the adjusted EBITDA for the fourth quarter of 2020 was $1.4B.

On a full-year basis, total revenue was down only 4%, while a net loss was $720 million for the 2020 fiscal year. MPLX reduced capital spending in 2020 by over $700 million from the target, and it will continue to focus on investments in projects that would deliver the highest returns.

“We remain committed to strict capital and expense discipline, and that discipline, combined with EBITDA growing over time, supports our continuing goal of generating excess cash for 2021 and providing the opportunity to return incremental capital to our unitholders,” said Mike Hennigan, Chairman, President, and CEO of MPLX.

CEO Michael Hennigan said several weeks ago that the company would start to buy back shares since the company’s stock seems “undervalued” at current prices. MPLX’s distributions are well-covered as the cash flow remains stable, and a high dividend yield looks like it can be kept in place going forward.

Technical analysis: $30 represents a strong resistance level

MPLX shares are not overvalued thanks to resilient operations and a healthy balance sheet and certainly remains a quality pick in the natural gas industry. If we compare the company’s EBITDA of $5.2B and the market capitalization of $25.9B, we can notice that this stock still has room for healthy growth.

Data source: tradingview.com

The important support levels are $22 and $20; $28 and $30 represent the resistance levels. If the price jumps above $28, it would be a signal to buy shares, and the next target could be around $30, but if the price falls below the $20 support level, it would be a firm “sell” signal.

Summary

MPLX shares have been moving in an uptrend last several months, and according to technical analysis, a positive trend remains intact. MPLX will start to buy back shares since its stock seems “undervalued,” and the company remains committed to strict expense discipline. MPLX’s distributions are well-covered as the cash flow remains stable, and it will continue to focus on investments in projects that would deliver the highest returns.

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