On Tuesday, Mizuho Securities maintained a positive stance on Cheniere Energy (NYSE:LNG), raising the price target to $214 from the previous $195 while keeping an Outperform rating on the stock. The adjustment reflects a more stable long-term outlook for the company, despite its year-to-date underperformance relative to other gas-levered Midstream C-corporations.
The underperformance of Cheniere Energy has been noted as somewhat of an anomaly, attributed to several factors. These include a perceived lack of exposure to the domestic data center and power demand narrative, an absence of earnings catalysts for the fiscal year 2024, and a cautious approach from investors regarding export project commercialization following the Department of Energy's (DOE) pause on permitting.
Despite these challenges, Mizuho views Cheniere Energy as being in a stronger position as it enters 2025. The firm anticipates that Cheniere will have increased access to marketing volumes, estimated at 165 terabtu, and a more favorable commercial environment, assuming the DOE's permitting pause comes to an end.
The analyst believes that while Cheniere may not directly tie its growth narrative to domestic power demand, the company stands to benefit from the broader theme of natural gas's role in the domestic and global energy mix. This perspective has led to the raised price target, signaling confidence in Cheniere's future prospects.
In other recent news, Cheniere Energy has reported a surge in China's gas demand, projecting an increase to 600 billion cubic meters by 2040, up from the current 400 billion. The company has also made significant strides with its expansion project in Corpus Christi, Texas, which is expected to enhance the U.S.'s capacity to export LNG. BofA Securities has initiated coverage on Cheniere Energy, assigning a Buy rating, and highlighting the company's strong contracted nature of earnings and its potential to increase free cash flow starting in 2025.
Cheniere Energy also recently announced an executive transition, with Corey Grindal moving from Executive Vice President and Chief Operating Officer to Executive Vice President and Advisor. The company has updated its bylaws, confirming the CEO's role as President, and has reported strong financial results for the second quarter of 2024, with a consolidated adjusted EBITDA of $1.3 billion and a net income of $880 million.
These recent developments reflect Cheniere Energy's ongoing efforts to expand its operations and enhance its financial performance. The company's progress in its expansion project and its robust financial results underscore its potential in the LNG sector. Cheniere Energy's strategic moves, coupled with the positive outlook from BofA Securities, indicate a promising future for the company in the global LNG market.
InvestingPro Insights
Cheniere Energy's financial metrics and market position align with Mizuho's optimistic outlook. According to InvestingPro data, the company boasts a market capitalization of $41.54 billion and a P/E ratio of 9.69, suggesting a potentially undervalued stock relative to its earnings. This valuation could support Mizuho's increased price target of $214.
InvestingPro Tips highlight that Cheniere Energy has raised its dividend for 3 consecutive years, with a current dividend yield of 0.95% and a robust dividend growth of 10.13% over the last twelve months. This trend of increasing shareholder returns aligns with the company's strong financial position and may attract income-focused investors.
Despite the year-to-date underperformance mentioned in the article, InvestingPro data shows that Cheniere Energy has delivered a 1-year price total return of 11.18% and is currently trading near its 52-week high at 95.04% of that level. This performance, coupled with the company's profitability over the last twelve months and analysts' expectations of continued profitability this year, supports Mizuho's Outperform rating.
For investors seeking a deeper understanding of Cheniere Energy's potential, InvestingPro offers 5 additional tips that could provide valuable insights into the company's prospects and market position.
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