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Linn Energy (LINE) Suspends Distribution: FBR Capital Reduces Price Target

By Kate George 

Linn Energy LLC (NASDAQ:LINE) is among several companies affected by the crude oil price crash that stole headlines for most of 2014 and into 2015. Consequently, investors are staying away from natural oil and gas companies. Last week, Linn Energy announced the approval by its Board of Directors for management’s recommendation of suspension of Linn’s distribution and LinnCo’s dividend. The company’s ability to reinstate the distribution and dividend will be evaluated by the Board of Directors on an ongoing basis.

Following yesterday’s announcement, Chad Mabry from FBR Capital weighed in on the stock. Mabry downgraded the stock to Underperform from Market Perform and reduced his price target for the stock to $2 from the earlier target of $6.

Mabry commented, “Our DDM valuation methodology becomes irrelevant following the partnership’s suspension of its distribution effective September 30. From an NAV perspective, we do not see any residual value for unit holders unless commodity prices improve meaningfully.” He explained, “Our $2 price target represents an option value on LINE reinstating a distribution at some point in the future.”

As per TipRanks’ statistics, most analysts are shying away from the bullish camp. Out of 8 analysts who have recently rated Linn’s stock, 1 is bullish about the stock, 3 are bearish, while 4 have preferred to stay on the sidelines. Based on ratings given by these analysts over the past 12 months, the average consensus price target for Linn is $4.36, an upside of 46% over current levels.