ONEOK stock price target lowered to $87 from $107 at Mizuho

Mizuho has lowered its price target on ONEOK Inc. (OKE) to $87.00 from $107.00, while maintaining a Neutral rating, citing caution regarding the company's long-term growth outlook and the time required for organic project volumes to ramp up. This re-evaluation, based on a reduced 9.0x 2027 estimated adjusted EBITDA multiple, occurs despite ONEOK's strong Q1 2025 financial results, a 5% dividend yield, and strategic acquisitions like the $940 million Delaware Basin JV, which are expected to drive sequential improvements through fiscal year 2026. The adjustment reflects a nuanced view, balancing ONEOK's strategic expansion and near-term operational gains against persistent uncertainties in its sustained growth trajectory.

Analysis

Mizuho's decision to lower its price target on ONEOK Inc. (OKE) to $87 from $107, while maintaining a Neutral rating, underscores a significant concern regarding the company's long-term growth trajectory despite strong near-term fundamentals. This cautious stance, echoed by TD Cowen's initiation with a Hold rating, stems from the view that ONEOK's aggregate position in the Permian Basin remains smaller than integrated NGL peers and that its organic growth projects may face a prolonged ramp-up period before contributing meaningfully to earnings. The valuation adjustment, based on a reduced 9.0x multiple on 2027 estimated adjusted EBITDA, quantifies this skepticism. This is contrasted by the company's robust recent performance, including a 39% year-over-year revenue increase, a strong first quarter with $1.78 billion in adjusted EBITDA, and an attractive 5% dividend yield. Furthermore, ONEOK's aggressive expansion, marked by a $40 billion investment over two years and the recent $940 million acquisition of the Delaware Basin JV, demonstrates a clear strategy to bolster its portfolio, although the ultimate success of this integration remains a key uncertainty for analysts.

Key Decisions for Investors

• Income-focused investors may find the 5% dividend yield appealing, but should monitor the company's cash flow to ensure the payout is sustainable amidst its aggressive acquisition-led growth strategy.
• Investors should weigh the potential for near-term sequential improvements driven by project start-ups against the long-term execution risk and growth uncertainties highlighted by both Mizuho and TD Cowen.
• Potential investors could consider holding a neutral position, as the current stock price of $81.16 is below the new $87 analyst target, but the cautious ratings suggest significant upside is capped until there is greater clarity on the success of recent M&A integrations.
• Monitor key performance indicators related to volume ramp-ups on new assets and synergy realization from the recent acquisitions, as these will be the primary catalysts to validate the company's growth thesis and potentially trigger a ratings re-evaluation.