HESM Shorts Rise, But Analyst Opinion Shifts Before Thursday's Print

Hess Midstream LP has gained 3.1% over the past week, slightly ahead of the median 2.4% advance for its closest midstream peers. OKE led the group with a 4.3% weekly gain, while WES and EPD lagged at 1.8% and 0.5% respectively. HESM's 3.1% recovery follows a sharp 18.5% drop over the prior month, leaving the stock at $31.18, well below where most of the Street had it priced just weeks ago.

Short interest has climbed meaningfully since mid-September, rising 30% over the past month to 6.6% of the free float, roughly 8.5 million shares. The build has been steady: positions were near 6.4 million shares in mid-September and crossed 8.7 million by mid-October before a one-session pullback last Thursday. Yet the lending market tells a calmer story. Availability is ample at 153%, meaning about 1.5 shares remain available to borrow for every share currently lent out, close to the tightest level of the past year but nowhere near a constrained market. Borrowing costs remain low at 0.45%, easing roughly 10% over the past week. The options market reflects a similar lack of alarm: the put/call ratio of 3.16 is marginally below its 20-day average of 3.23, and sits well inside its 52-week range, suggesting no unusual hedging demand into the print.

The most newsworthy development is the abrupt shift in analyst opinion around the stock. On October 2, JP Morgan downgraded HESM to Underweight while holding its $39 target. Then on October 13, Morgan Stanley, Citigroup and UBS all cut their price targets, each moving from the high $30s to the low-to-mid $30s, with Morgan Stanley maintaining Underweight at $30. That wave of target reductions brought the consensus mean down to $33.43, which now sits only modestly above the current price of $31.18. Against that backdrop, Raymond James this week upgraded the stock to Outperform with a $32 target, the lone voice turning more constructive. The resulting consensus is a split hold, with three hold-equivalent ratings, one Outperform and at least one Underweight, centred on a narrow implied upside.

The ownership register adds an important structural note. Hess Investments North Dakota LLC, a related-party 13D filer, holds 38% of the class as last disclosed on October 8. GIP II Blue Holding holds a further 23.2% per its January 2025 disclosure. These two positions alone account for over 60% of the unit count, leaving a relatively thin public float and concentrating economic interest with insiders and strategic holders. ALPS Advisors, the largest institutional holder, added over 1.5 million units in the most recent reporting period. As with all Schedule 13D/G disclosures, stakes are as last reported around the 5% threshold and positions can change without a further filing.

Thursday's print will test whether the throughput and distribution figures justify the Raymond James upgrade against a backdrop of price targets that moved sharply lower just two weeks ago, with the stock now trading at the lower end of the revised Street range.