Can Plains All American Pipeline Gain Upward Momentum?
Plains All American Pipeline (PAA) went past its short-term moving average due to last week’s rally. The upward movement might indicate bullish sentiment in the stock. However, the partnership continues to trade below its long-term moving average. Plains All American Pipeline was trading 0.9% above its 50-day simple moving average and 6.1% above its 200-day simple moving average as of February 9, 2018. In comparison, Plains All American Pipeline’s peers, Enbridge Energy Partners (EEP) and Buckeye Partners (BPL) were trading 7.3% and 2.3% below their 50-day simple moving averages.
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A recovery in the midstream sector due to a gain in crude oil prices and strong drilling activity could push Plains All American Pipeline above its long-term moving average and result in bullish sentiment.
The short interest in Plains All American Pipeline was 1.1 million shares as of February 9, 2018. At the same time, the short interest in Plains All American Pipeline as a percentage of the float ratio was 2.6%—slightly lower than the 30-day average of 2.7%. The short interest in Plains All American Pipeline is lower than the last one-year average of 2.7%, which indicates bullish sentiment in the stock.
Plains All American Pipeline was trading at a forward EV-to-EBITDA multiple of 11.0x as of February 9, 2018. The multiple is below the one-year and three-year average of 12.7x and 11.1x, respectively. However, Plains All American Pipeline’s current distribution yield of 5.6% is lower than the five-year average yield of 6.9%—mainly due to the two distribution cuts announced last year.
Plains All American Pipeline is trading at a discount to its historical average. The discount might indicate a buying opportunity considering the partnership’s strong presence in the prolific Permian Basin, strong earnings growth, improved balance sheet position, simplified capital structure, and significant expansion opportunities. Plains All American Pipeline expects to spend $1.4 billion on growth projects in 2018.