The article was written by Vladimir Zaslavsky, a Financial Analyst at I Know First.

Cheniere Energy Stock Prediction for 2018: Strong Market Positioning and Unparalleled Potential

“Financial freedom is available to those who learn about it and work for it” ~ Robert Kiyosaki

Summary 

• LNG strongly positioned for 2018 by expansion and demand
• Forecasted to gain significant market share
• I Know First bullish forecast for LNG in 2018

Cheniere Energy, Inc., an energy company, engages in the liquefied natural gas (LNG) related businesses in the United States. It operates through two segments, LNG Terminal Business, and LNG and Natural Gas Marketing Business. The company owns and operates Sabine Pass LNG terminal in western Cameron Parish, Louisiana; and Corpus Christi LNG terminal near Corpus Christi, Texas. It also owns Creole Trail pipeline, a 94-mile pipeline interconnecting the Sabine Pass LNG terminal with various interstate pipelines. In addition, the company is involved in the LNG and natural gas marketing business. Cheniere Energy, Inc. was founded in 1983 and is based in Houston, Texas.

Cheniere Energy, Inc. (NYSEMKT:LNG) owns or controls an array of liquefied natural gas (LNG) assets directed to serve energy industry export markets. Currently, Cheniere Energy is undergoing an expansion phase – inevitably, a costly endeavor. Whilst investors can continue to expect net losses for the coming periods, Cheniere Energy has demonstrated strong performance and ultimately, strong potential.

Market Positioning

The ongoing rally has driven Cheniere Energy’s market cap to $13 billion. Indeed, this remains significantly below the $19.89 billion valuation it briefly reached in 2014. Since then, Cheniere Energy has increased its debt levels by 154%. Cheniere Energy comprises of multiple subsidiaries, each with a significant debt balance. At the end of September, 2017, Cheniere Energy had $24.9 billion in long term debt on its balance sheet – reflecting a debt-to-assets ratio of 92%. Some of that debt is a direct obligation of the company, whilst some is owed by various subsidiaries, serving as an indirect obligation to the Cheniere Energy parent. The complex business structure is illustrated below. Management is aware of the confusing web of relationships and has stated that “simplify[ing] corporate structure” is a goal for 2018.

IMAGE SOURCE: CHENIERE ENERGY INVESTOR RELATIONS

Bottom Line

Cheniere Energy has consecutively seen a net loss for the past 10 years. The losses are attributed to the company’s effort to expand and build LNG facilities. Its main facility is Sabine Pass, which is located on the border of Texas and Louisiana.

Nevertheless, production growth will likely create significant earnings and cash flow for subsequent years. Considering that 2017 was the first year of commercial operations, 2018 will benefit from an entire year of increased volumes. With time, it is expected that Cheniere Energy will have the ability to repay its debt, and ultimately realize a positive bottom line.

Top Line

Revenue, however, paints a different picture by highlighting an important turning point for Cheniere Energy. Throughout the first nine months of 2016, Cheniere Energy generated $711 million in revenue. The third quarter performance report in 2017 shows that revenue was approximately $3.9 billion – an increase factor of 3.6.

IMAGE SOURCE: CHENIERE ENERGY INVESTOR RELATIONS

The increase in revenue is essentially the result of the Sabine Pass facility starting to achieve its targets. Whilst revenue figures are promising, the important fact is that the increase in top-line indicates that the company’s growth efforts are working. Indeed, it presents an extremely promising future, whereby capital expenditure will be reduced and the bottom line will increase.

Cheniere’s Potential

The United States is predicted to become the third-largest exporter of liquefied natural gas, following Australia and Qatar. It is forecasted that the United States export capacity will total 9.5 billion cubic feet per day by 2019, a vast increase from 0.8 billion cubic feet per day at the beginning of 2016.

The increase in demand for liquified natural gas is very favorable for Cheniere Energy. If all goes to plan with the expansion of Sabine Pass and Corpus Christi, then Cheniere Energy will own approximately 4.5 billion cubic feet per day of the country’s total export capacity.

Analyst Coverage

A number of analysts, polled by Nasdaq, shared their views on the current momentum. Of 11 analysts surveyed, (includ

ing JP Morgan Securities, Wells Fargo, Raymond James and US Capital Advisors) 7 advise “Strong Buy,” whilst the remaining advise investors to “Hold.” A strong buy recommendation indicates that the shares are currently undervalued.

I Know First Algorithmic Bullish Forecast for LNG

My positive outlook on LNG in 2018 resonates with I Know First’s forecast. I Know First currently maintains a bullish stance on LNG for 2018 with signal strength 566.36 and predictability 0.80 for the 1-year forecast.

How to read the I Know First Forecast