Morgan Stanley’s June 10 downgrade of Hess Midstream (HESM) to Underweight, citing high valuation, limited growth visibility, and sponsor strategy uncertainty, has put fresh focus on how much of the stock’s story is already priced in.

Hess Midstream’s share price has eased slightly in recent weeks, with the stock down over the past month and quarter, even though the year to date share price return is positive and longer term total shareholder returns remain strong. This suggests momentum has cooled after a solid multi year run.

If you are weighing how this kind of reassessment could play out in other parts of the market, it may be worth scanning 34 power grid technology and infrastructure stocks

With Hess Midstream trading at $38.63 against an analyst price target of $36.83 while carrying an estimated intrinsic discount of about 60%, should you view this as a potential mispricing to explore, or is the market already accounting for future growth?

Most Popular Narrative: 4.9% Overvalued

Hess Midstream's most followed narrative pegs fair value at $36.83, slightly below the latest $38.63 close, setting up a tight valuation debate.

Multi-year minimum volume contracts with Hess Corp (now under Chevron), providing highly predictable, inflation-resistant fee-based revenue streams through the late 2030s, which supports stable adjusted EBITDA and consistent dividend/distribution growth.

Want to see what underpins that cash flow confidence, the margin trajectory, and the lower future P/E baked into this model? The full narrative spells out the revenue glide path, profitability assumptions, and discount rate choices that support this fair value call.

Result: Fair Value of $36.83 (OVERVALUED)

However, this hinges on Hess and Chevron keeping Bakken activity supportive and on regional or ESG related policy shifts not undermining those long term throughput assumptions.

Another Angle: Multiples Point to Undervaluation

While the most popular narrative flags Hess Midstream as about 4.9% overvalued versus a $36.83 fair value, the current P/E of 13.4x tells a different story. It sits slightly below the US Oil and Gas industry at 14x and well under both peer average at 23.1x and a fair ratio of 20.4x, which implies the market could move closer to that level over time.

In practical terms, that gap suggests investors are paying less for each dollar of earnings than both peers and the fair ratio imply. This raises the question of whether this is a margin of safety or a signal that expectations for Hess Midstream are already capped.

Next Steps

Torn between the mixed signals in the story so far? Use the latest numbers to check your own thesis and consider acting before sentiment shifts too far, starting with 4 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.