Stifel cuts Cheniere Energy Partners stock rating to sell

On Friday, Stifel analysts downgraded Cheniere Energy Partners , LP (NYSE:CQP) stock from Hold to Sell, adjusting the price target slightly upward to $51 from $50. The downgrade comes amid expectations that the company’s expansion of Sabine Pass, known as Stage 5, will not be operational until 2030 or later. Stifel’s analysts acknowledge that while the recent election results might facilitate the expansion process, they believe the market has overly priced in these prospects. This view aligns with InvestingPro data showing CQP trading near its 52-week high of $66.47, with the stock currently at $63.14. Analysis suggests the stock may be overvalued at current levels.

The analysts provided insight into the long-term financial outlook for Cheniere Energy Partners, suggesting that after the company begins reducing its debt, distributions could potentially increase to approximately $4.50 per unit. However, this scenario is not anticipated to occur for at least another five years. They also speculated on a potential 7% distribution yield by 2030, which would be contingent on the rates of 10-year treasuries at that time, potentially leading to a unit price of $64. According to InvestingPro data, CQP has maintained dividend payments for 19 consecutive years, with a current yield of 4.97%. The company’s strong dividend history is one of several key metrics available to Pro subscribers.

Despite the slight increase in the price target, the analysts expressed concerns over the current distribution yield of 5.2% and the possibility of a decline in the stock’s value if LNG prices were to fall. They emphasized that until the anticipated increase in distributions materializes, investors should not expect significant growth, leading to the decision to downgrade the stock to Sell.

The report also highlighted that distributions are expected to remain flat for the time being, which could contribute to the stock’s downside risk. This outlook suggests that investors may need to wait several years before seeing substantial returns from their investment in Cheniere Energy Partners. The firm’s analysis indicates a cautious approach to the stock, advising investors of the potential for a decrease in value in the near term.

In other recent news, Cheniere Energy Partners reported fourth-quarter earnings that did not meet analyst expectations, although its revenue exceeded estimates. The company posted adjusted earnings per unit of $1.05, falling short of the consensus estimate of $1.09. However, revenue reached $2.46 billion, surpassing the projected $2.19 billion. Cheniere Partners generated a net income of $623 million in the fourth quarter, a decrease from $906 million in the same period the previous year, primarily due to unfavorable changes in the fair value of derivative instruments. For the full year 2024, the company reported total revenues of $8.7 billion, marking a 10% decline year-over-year. Despite the revenue decrease, Cheniere Partners exported 431 LNG cargoes in 2024, slightly up from 425 in 2023. Looking ahead, the company introduced its full-year 2025 distribution guidance, projecting between $3.25 and $3.35 per common unit, while maintaining a base distribution of $3.10 per unit. These recent developments highlight the mixed financial performance of Cheniere Energy Partners.

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