Is Enbridge stock a buy or sell amid unfavourable pipeline ruling?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Nov 30, 2021
  • Enbridge shares edged lower by 1.73% on Tuesday.
  • Its application to sell pipeline contracts long-term instead of monthly was rejected by the regulator.
  • Analysts think the rejection could hurt ENB’s bottom line.

On Tuesday, Enbridge Inc. (BER:EN3) shares fell by 1.73% after its application to offer pipeline contracts long-term rather than monthly was rejected by the Canadian Energy Regulator. Analysts think the rejection could have adverse effects on the company’s bottom line.

Enbridge wanted to sell space on its Mainline oil pipeline network through long-term contracts, rather than monthly, thus guaranteeing a steady flow of income. The company said it will now reopen discussions with shippers on a new tolls agreement, which now hold the upper hand in the negotiations.

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Canadian oil prices plunged by 20% following the pipeline ruling. 

Enbridge shares have declined by more than 13% since peaking on the 5th of November. And based on the recent developments, the declines could continue for the foreseeable future.

Is it safe to bet on Enbridge?

From an investment perspective, Enbridge shares trade at reasonable trailing 12-month and forward P/E ratios of 16.94 and 19.40, respectively. Therefore, value investors could find it as an interesting option for their portfolios.

However, with analysts predicting its EPS to decline by 44% this year before recovering by 7.70% next year, it may not be a compelling option to growth investors.

Source – TradingView

Technically, Enbridge shares seem to be trading within a sharply descending channel formation in the intraday chart. As a result, the stock has plummeted deep into oversold conditions.

Therefore, investors could target technical rebounds at about $38.47, or higher at $39.67. However, given the current downward pressure, Enbridge shares could fall further towards $36.40 or lower to $35.32.

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