Goldman Sachs Starts On Golar Bearish, Says Growth Story Already Priced In

There is downside to Golar LNG Limited’s GLNG stock as the growth story is already priced in and LNG supply growth is expected to slow in the near term, according to Goldman Sachs.

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The Analyst

Goldman Sachs’ Sahar Islam initiated coverage of Golar LNG with a Sell rating and a price target of $12.

The Thesis

LNG supply additions are expected to have peaked in 2018-19 and could decelerate through 2020-24, Islam said in the initiation note.

He added that shipping rates had risen in the recent past, with new LNG supply entering the market, but this positive trend is likely to slow from 2020.

The company’s LNG shipping division, which is estimated to account for more than half the group revenue and around 30% of earnings, is the most volatile part of the business, Islam mentioned.

“Given the volatility in shipping rates and still healthy supply levels, we expect charter rates to decline from here,” the analyst wrote.

Through its various holdings, Golar LNG has exposure to some longer-term contracts. Islam added, however, that their value is already priced in.

Price Action

Shares of Golar LNG were up 2.60% to $13.65 at the time of publishing on Wednesday.