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On Tuesday, Citi analysts revised their outlook on Venture Global (NYSE:VG) shares, lowering the price target to $11.00 from a previous $18.00 while maintaining a Neutral rating. The stock, currently trading at $9.73, has fallen significantly from its 52-week high of $25.50. According to InvestingPro analysis, the company appears overvalued at current levels. The adjustment comes in response to anticipated declines in cash flow, attributed to several factors impacting the company’s financial projections.
Venture Global’s initial EBITDA guidance for 2025 was lower than expected, with a midpoint of $7.1 billion compared to Citi’s earlier estimate of approximately $8.3 billion. The company’s current EBITDA stands at $2.085 billion, while operating with a concerning debt-to-equity ratio of 10.29x. This shortfall is due to various elements, including commodity price assumptions, development costs, and the timing of project completions. Citi has now adjusted its EBITDA estimate to $6.9 billion. InvestingPro subscribers have access to 16 additional key insights about Venture Global’s financial health and growth prospects.
The analysts also updated their assumptions for LNG margins, now forecasting a spot margin of around $7.50 per million British thermal units (mmbtu) for 2025, a decrease from the nearly $10/mmbtu previously anticipated. Commodity prices pose a significant immediate risk to these estimates, with Venture Global indicating an EBITDA sensitivity of approximately $625-$675 million for every $1/mmbtu shift in liquefaction fees.
Furthermore, the analysts have altered the expected timeline for Venture Global’s long-term growth projects, including CP3 and Delta. This change follows the announcement of an 18.6 million tonnes per annum (mtpa) expansion at the Plaquemines facility. The expansion is predicted to coincide with a potential period of LNG oversupply, which could postpone the demand for additional capacity. With negative free cash flow of $11.57 billion and an EV/EBITDA multiple of 26.38x, the new $11 price target reflects an approximate 9.0x multiple on the company’s projected 2026 EBITDA.
In other recent news, Venture Global’s fourth-quarter 2024 earnings report has prompted several analyst firms to adjust their price targets and ratings. Mizuho (NYSE:MFG) Securities lowered its price target to $18 while maintaining an Outperform rating, noting that the company’s adjusted EBITDA guidance for 2025 fell short by approximately $2 billion. Despite this, Mizuho remains confident in Venture Global’s operational strengths and potential for growth. Bernstein SocGen also revised its price target downward to $12, maintaining a Market Perform rating, as the company’s earnings report revealed EBITDA projections for 2025 that did not meet expectations.
Guggenheim and Goldman Sachs both reduced their price targets to $20, each maintaining a Buy rating on Venture Global. Guggenheim highlighted a weakening merchant commodity market and rising costs as factors impacting the company’s performance. Despite these challenges, Guggenheim noted positive developments at the Plaquemines project. Similarly, Goldman Sachs cited impressive progress at the Plaquemines facility and the potential for brownfield expansion, though it expressed concerns about the company’s ability to capitalize on global gas margins.
Venture Global’s recent earnings report and subsequent analyst revisions reflect a period of uncertainty and adjustment for the company. The announcements also highlighted the company’s plans for expansion and ongoing development, with a focus on increasing contracting levels to mitigate cash flow volatility. As Venture Global navigates these challenges, analysts continue to monitor its strategic initiatives and market conditions closely.
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