Guggenheim cuts Venture Global target to $20 from $27, holds Buy rating

On Friday, Guggenheim analyst Shahriar Pourreza adjusted the price target for Venture Global (NYSE:VG) shares to $20.00, a decrease from the previous $27.00, while maintaining a Buy rating on the stock. According to InvestingPro data, the company currently trades at an EV/EBITDA multiple of 26.4x, suggesting a premium valuation despite recent challenges. The revision followed Venture Global’s fourth-quarter earnings report for 2024, which fell short of consensus estimates, and the company’s guidance for 2025 that was also below expectations. The lower earnings were attributed to a combination of a weakening merchant commodity market and rising costs, with analysts forecasting a 31% revenue decline for 2025.

Venture Global’s stock experienced a significant drop on the day of the earnings call, with a decline of 36% compared to the S&P 500’s 2% fall on March 6, 2025. This stark contrast was seen as indicative of the market’s impatience with the pace of Venture Global’s development ramp-up and a lack of liquidity.

Despite the disappointing financial performance and the challenges faced, there were positive developments including the progress at the Plaquemines project, which is advancing ahead of schedule. However, the positive news was overshadowed by the announced capital cost inflation for the same project. InvestingPro analysis reveals the company operates with a significant debt burden, with total debt of $29.8 billion and negative free cash flow of -$11.6 billion in the last twelve months.

The commodity markets have been responding to the possibility of easing supply constraints in the European Union, which could result from peace talks between Ukraine and Russia. This response comes even as recent data points to continued market tightness, such as the EU’s decision to maintain gas storage quotas through 2027, low storage inventory levels, and the potential for multinational coordination on long-term purchasing strategies.

Management at Venture Global, during the earnings call, reaffirmed their belief in the attractiveness of the current market conditions and contract terms for the development of their projects, particularly with the CP2 project moving toward its Final Investment Decision (FID). The company’s management maintains a long-term focus, anticipating that demand will continue to outstrip supply, a view not currently reflected in forward market curves.

In light of these developments, Guggenheim acknowledged the negative data points concerning development costs and risks but also noted that the long-term assumptions in their model remain largely unchanged. Despite the near-term setbacks, they continue to support Venture Global with a Buy rating and a revised price target of $20.00.

In other recent news, Venture Global reported its fourth-quarter 2024 earnings, revealing a significant decline in revenue to $1.5 billion, which represents a 737% decrease compared to the previous year. Despite this, the company saw a notable increase in net income, reaching $871 million. Analysts from Goldman Sachs and Scotiabank (TSX:BNS) revised their price targets for Venture Global, with Goldman Sachs lowering its target from $29 to $20 while maintaining a Buy rating, and Scotiabank adjusting its target from $17 to $15, retaining a Sector Perform rating. The company’s guidance for 2025’s EBITDA is set between $6.8 billion and $7.4 billion, which is notably below prior expectations.

Goldman Sachs highlighted concerns over Venture Global’s ability to capitalize on global gas margins due to softer 2025 guidance and ongoing development expenses. Meanwhile, Scotiabank noted confusion over the company’s introduction of a "weighted average fixed liquefaction fee" instead of net spreads, impacting the fiscal year 2025 EBITDA forecast. Venture Global continues to focus on expanding its LNG production capabilities, with several projects underway, including the Plaquemines Phase III expansion. Despite the challenges, analysts acknowledge the potential value in Venture Global’s stock as investors look for clearer future directions.

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