Is Cheniere Energy's 6-Month Gain of 26% a Buy Signal for 2025?

Cheniere Energy LNG, a major player in natural gas exports, has been riding a strong wave of growth. The stock recently closed at $208.89, just 8% shy of its 52-week peak of $228.10, reflecting an impressive 25.9% surge over the past six months. Outperforming both its Oil/Energy sector and the broader S&P 500, Cheniere’s gains also outshined peers like MPLX LP MPLX and TC Energy Corporation TRP.

LNG, MPLX, TRP 6-Month Stock Performance

Zacks Investment Research Image Source: Zacks Investment Research

With such stellar performance, investors may ask: Is it time to buy the stock for 2025, hold, or cash in?

About Cheniere Energy & the Importance of LNG

Houston, TX-based Cheniere Energy, with the very appropriate ticker of LNG, is primarily engaged in the transportation of liquefied natural gas (or “LNG”).

With growing European and Asian demand, LNG is becoming an increasingly critical component of the global energy landscape. The United States has emerged as a dominant player, largely due to its vast natural gas resources and advanced infrastructure. LNG's role in enhancing energy security and supporting the transition to cleaner fuels cannot be overstated. Investors should know that LNG is natural gas cooled to a liquid state, making it significantly more compact for transportation and storage purposes.

Key Drivers of Cheniere’s Growth

Rising LNG Demand and Infrastructure Expansion: With global LNG demand expected to remain tight until 2027, Cheniere benefits from strong pricing power. Its strategically located Sabine Pass and Corpus Christi facilities are pivotal in meeting Europe’s and Asia’s growing energy needs. Notably, the Corpus Christi Stage 3 project is ahead of schedule and on budget, set to boost production and revenues by 2025.

Stable Contracted Cash Flows: Cheniere’s financial foundation is fortified by its long-term contracts, which shield it from market volatility. During Q3 2024, 97% of its production was tied to such agreements, ensuring revenue predictability even in fluctuating markets. These contracts also include variable pricing mechanisms that safeguard margins, bolstering Cheniere’s resilience against cost increases.

Upward Earnings Revisions: The Houston, TX-based energy player has lately been blessed with positive earnings estimate revisions. Looking at the current year, analysts have raised estimates by around 5% in the past 30 days. The 2024 Zacks Consensus Estimate is now $11.85 per share compared to $11.26 a month ago.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
 

Zacks Investment Research Image Source: Zacks Investment Research

Enhanced Shareholder Returns: Cheniere’s capital allocation strategy focuses on rewarding its shareholders. The company repurchased $300 million in stock during Q3, bringing its 2024 total to $2 billion. Furthermore, it raised its annual dividend by 15% to $2.00 and plans to sustain 10% annual dividend growth, signaling long-term confidence in its financial health.

Leadership in Environmental Stewardship: Cheniere has set a rigorous methane emissions target of 0.03% per ton of LNG produced by 2027, significantly enhancing its ESG profile. This commitment aligns with Cheniere's reputation for operational transparency and reliability, which strengthens its competitive edge, particularly as demand grows for cleaner energy solutions.
 

Cheniere Energy, Inc. Image Source: Cheniere Energy, Inc.

Although Cheniere Energy holds significant long-term growth potential, the prevailing market conditions and the specific challenges it faces warrant careful consideration.

Some Cautionary Analyses

Market Volatility and Oversupply Concerns: Cheniere’s performance is exposed to volatile LNG prices and geopolitical risks. As new facilities come online globally, potential oversupply could weaken spot prices and pressure contract renewals. While long-term agreements provide stability, growing capacity may dilute Cheniere’s pricing power, challenging profitability.

Sustainability of Buybacks: Cheniere’s aggressive share repurchase program raises questions about its long-term sustainability. Funding buybacks partially through debt might benefit shareholders in the short term but could increase financial strain if leverage continues to rise.

Debt Pressures: Running capital-intensive operations has saddled Cheniere with $22.6 billion in long-term debt, while cash reserves stand at just $3.1 billion. A debt-to-capitalization ratio of 71.3% highlights limited financial flexibility, presenting a significant risk if market conditions turn unfavorable.
 

Zacks Investment Research Image Source: Zacks Investment Research

Geopolitical and Regulatory Risks: Operating within the global LNG market, Cheniere faces various geopolitical and regulatory risks, such as trade tensions and energy policy shifts. The ongoing war in Ukraine and potential policy changes in Asia and Europe add uncertainty to LNG’s demand dynamics.

Conclusion: A Time to Hold

While Cheniere Energy’s robust fundamentals and strategic growth initiatives make it a compelling long-term investment, its financial challenges and exposure to price volatility suggest caution. Investors holding shares may benefit from the company’s strong position, but initiating new positions might warrant waiting for a more favorable entry point. Currently, Cheniere Energy carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Naming Top 10 Stocks for 2025

Want to be tipped off early to our 10 top picks for the entirety of 2025?

History suggests their performance could be sensational.

From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.

Be First to New Top 10 Stocks >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 5 Stocks Set to Double. Click to get this free report

TC Energy Corporation (TRP) : Free Stock Analysis Report

Cheniere Energy, Inc. (LNG) : Free Stock Analysis Report

MPLX LP (MPLX) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Info icon

This data feed is not available at this time.

Data is currently not available

Sign up for the TradeTalks newsletter to receive your weekly dose of trading news, trends and education. Delivered Wednesdays.