According to Citi, Select Water Solutions will be a winner thanks to recent business changes. The company, which provides sustainable water services to the oil and gas industry, recently began a strategic shift to its water infrastructure business with a focus on managing and recycling produced water. Citi analyst Scott Gruber said Select Water’s largest business line is water services, which is “more closely tied to volatile and cyclical completion activity,” but the company does not emphasize that area. The company’s moves are “supported by trends in the energy industry,” the company said. He is bullish that these changes will result in higher and more stable margins. Gruber upgraded the stock from Neutral to Buy. He also raised his price target to $13 from $9, suggesting a 40% upside from Wednesday’s closing price. “Through a combination of recent M&A and organic growth, we believe WTTR is well-positioned to execute on its strategic transformation and target upside for its stock,” Gruber said in a note Thursday. The analyst noted that Select Water Solutions is currently trading at a discount to its peers. The company currently trades at just over 4x earnings before interest, tax, depreciation and amortization over the next 12 months, compared to competitor Alice Water Solutions, which trades at nearly 6.5x. he added. “With M&A accelerating WTTR’s infrastructure growth, the fair blend multiple for 2025E appears to be around 4.7x, above the stock’s current price of around 4.1x.Furthermore, the slowdown in fracwater demand “The downside risks to oil prices appear to have gone away with the rise in stock prices,” Gruber said.
The company, which provides water to oil and gas drillers, could earn 40%, Citi says.
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