This Wall Street Analyst Sees An Upside For Cheniere, Natural Gas Players: Here's Why

Cheniere Energy Inc. LNG provides clean, secure and affordable liquified natural gas to integrated energy companies, utilities and energy trading companies. It also owns a stake in Cheniere Energy Partners CQP.

The Analysts: Raymond James analysts Justin Jenkins maintains a Strong Buy rating on Cheniere Energy upgrading its price target from $178 to $210 per share.

Why It Matters: Noting that there may be a negative stretch for midstream stocks which could be attributed to the 15% decline quarter-over-quarter in benchmark natural gas liquid prices.

Also Read: China Cashes In - Energy Companies Reroute US LNG Tankers For Profit

It is important to note that historically during the third quarter, investors are looking for 2023 guidance, although the midstream segment is typically hesitant about delivering full-year guidance in the third quarter, the analysts reported.

Meanwhile, Jenkins reported that the financial models in midstream are under-appreciated as quarters and years of solid free cash flow generation accumulate and total return potential improves.

Energy firms involved in the midstream provide the processing, storing, transportation, and marketing of oil and natural gas liquids. As midstream names are positioned behind major E&P firms, Jenkins believes that winter volatility can provide upside for the natural gas industry, primarily those focused on exports.

As midstream earnings are typically based on volume, price-shifts will offset tailwinds as volume-driven capex puts a hit on free cash flows. Lastly, Jenkins remains cautious on natural gas production growth, as there are reasons to believe moderate, but geographically broad-based growth may be more possible within the U.S. markets.

Key Takeaways

• According to Jenkings, Cheniere Energy has been among the best trading stocks within our space since the second quarter, which can be based on the impressive mid-period capital allocation update.
• Raymond James is increasing its adjusted EBITDA estimates for all the third quarter of 2022 and 2023 as international spreads have remained high across the curve into winter 2022 and 2023.
• As Cheniere owns a stake in Cheniere Partners, the analysts are nudging estimates higher on strong utilizations, after the revised capital allocation plan announcement, Jenkins mentioned.

Raymond James Bullish Midstream Names

• Energy Transfer ET has a price target of $15 per share.
• Williams Companies WMB has a price target of $42 per share.
• Targa Resources TRGP has a price target of $92 per share.