ProFrac plunges as Morgan Stanley cuts to Sell equivalent

ProFrac (NASDAQ:ACDC) -8.2% in Thursday’s trading after Morgan Stanley downgrades shares to Underweight from Equal Weight with a $6.50 price target, down from $7, seeing outsized risk in North America completions revisions risk and more attractive risk-reward opportunities elsewhere.

Morgan Stanley analyst Devin McDermott said he sees more downward revision risk for North America completions markets – ProFrac’s core exposure – and the most risk in proppant markets where the company has outsized exposure, 25%-30% of long-term adjusted EBITDA vs. peers at 0-10%.

On relative performance drivers, ProFrac (ACDC) screens in-line on free cash flow revisions, free cash flow yield, and bear case leverage, and less attractive on EBITDA revisions, TSR yield, EV/EBITDA, PT upside, risk-reward, and volatility, McDermott says.

Beyond Q3, the analyst reiterates his preference for oilfield services stocks with international exposure over North America, including Baker Hughes (BKR) and SLB (SLB).