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On Tuesday, Goldman Sachs began coverage of Venture Global (NYSE:VG) with a Buy rating and set a price target of $29.00, representing significant upside from the current price of $15.96. The firm's analyst cited the company's role as a developer and operator of liquefied natural gas (LNG) export terminals on the US Gulf Coast as a key factor in the positive outlook. According to InvestingPro data, the company commands a substantial market capitalization of $38.62 billion, despite experiencing a challenging year with a 33.5% decline in stock price year-to-date.
The analyst highlighted three primary reasons for the optimistic stance on Venture Global. Firstly, the company's distinctive construction and operating model is designed for quicker project completion and potential volume increases post-launch, which could lead to considerable cash flow growth and high capital returns. Secondly, Venture Global's moderate level of contracted sales could benefit from the disparity between lower US gas prices and higher global prices, potentially yielding high EBITDA, which currently stands at $2.2 billion for the last twelve months. This aspect may also lower the projected need for equity funding before an expected decline in global gas prices later in the decade. InvestingPro subscribers can access 13 additional key insights about Venture Global's financial health and valuation metrics.
The third reason for the positive rating is the anticipated catalysts over the coming months. These include the completed in-service of the Calcasieu Pass terminal, the expected increase in volume at the Plaquemines facility as it becomes operational, and the final investment decision (FID) on their third project, CP2, slated for this summer.
Despite acknowledging the high volatility of the stock due to its exposure to global gas pricing and dependence on the successful execution of growth projects, Goldman Sachs finds the valuation of Venture Global attractive. The $29 price target is based on a long-term discounted cash flow (DCF) analysis with an 11.25% equity discount rate. This rate is slightly higher than the approximately 10% level implied for Cheniere, Venture Global's primary competitor, reflecting the latter's more established contract profile and execution track record. Nevertheless, Goldman Sachs sees significant upside potential for Venture Global's stock from its current position.
In other recent news, Venture Global Inc . has been the subject of several analyst ratings and has completed its initial public offering (IPO). RBC Capital Markets assigned an Outperform rating to Venture Global, setting a price target of $20. The firm highlighted the company's modular approach to liquefied natural gas (LNG) production, low-cost production strategy, and potential for cash flow generation.
Meanwhile, Citi initiated coverage on Venture Global with a Neutral rating and an $18 price target. The firm noted the company's potential for significant leverage in the LNG market, ambitious growth strategy, and the risks associated with its open contract position.
Bernstein also started coverage of Venture Global, issuing a Market Perform rating and a $20 price target. The firm expressed caution due to the uncertain macroeconomic environment affecting the trans-Atlantic gas margin.
In addition to these ratings, Venture Global successfully completed its IPO and amended its corporate governance structure. These are all recent developments that investors should consider when assessing the company's performance and potential.
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