TransCanada Corporation (TSX:TRP)(NYSE:TRP) got some good news at the start of the week when regulators in Nebraska gave the okay for the company’s Keystone XL pipeline project. Although TransCanada’s stock saw an initial boost on the news, it eventually dropped back down in price. Year-to-date the stock is up just 3% and has been stuck in a narrow range all year long.
A big reason for the muted response from investors is that Keystone XL still isn’t a certainty. Although Nebraska approved the pipeline, it was a different route than what TransCanada wanted, a route that will be more costly and difficult to complete. TransCanada already cancelled the Energy East pipeline earlier this year after the company concluded the expanded scope of costs it had to consider from the National Energy Board would increases expenses significantly and no longer make the project viable. Investors may be concerned we could be seeing the same happen now with Keystone XL.
One reason that investors may want to buy TransCanada’s stock is that there is likely already a healthy dose of pessimism built into the share price and if the company doesn’t go ahead with Keystone XL it might not see a big crash in price given that’s what many might already be expecting.
However, if Keystone XL does go ahead the stock will likely get a big boost in share price. With a lot more upside potential than the stock has downside risk, that might make it a good bet for an investor willing to take on a calculated risk.
