This Liquefied Natural Gas Play Is Predicted To Double In Value

New Fortress Energy shares are expected to more than double over the next few years because of the growing global demand for liquefied natural gas, according to Deutsche Bank. 

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Analyst Chris Robertson, who is part of the firm's research department, set a price target of $60 per share for the natural gas company, which is a 110% increase from last Thursday's closing price. 

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Robertson wrote in a Sunday note that despite recent geopolitical developments, “we see a wider backdrop of energy transitions away from traditional, carbon-intensive fuels to cleaner or zero-carbon alternatives.” As such, he concluded by stating, “Naturally, natural gas will prove to be a bridge fuel over the next few years, as natural gas combustion emits approximately 50 percent fewer carbon dioxide emissions than traditional coal combustion.”

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According to Deutsche, New Fortress Energy's earnings between 2022 and 2025 are expected to increase by more than 235%. Robertson believes that the company has a great chance of growing its earnings over the coming years, because of the development of floating liquefied natural gas assets in the Gulf of Mexico, as well as two additional terminals. 

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In fact, Robertson's estimate is based on the assumption that the majority of New Fortress Energy's volumes will be secured through period contracts rather than being sold on the spot market. The spot market uses market conditions that are current at the time, which causes it to fluctuate more drastically throughout the day. 

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When compared to the extreme price volatility in today's LNG market, Robertson believes longer-term contracts will result in lower EBITDA margins, given that they lock in volumes for a longer period of time, with more predictable and stable cash flows in the future. 

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New Fortress shares were up as much as 6.1% on Monday, but they have fallen 31% year-to-date after skyrocketing 76% in 2022 as the stock price had risen by 76%.

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