Stifel maintains Buy on New Fortress Energy, target at $16

On Monday, Stifel analysts maintained their Buy rating for New Fortress Energy (NASDAQ:NFE) shares, with a steady price target of $16.00. Trading at $11.17, NFE has seen an 11.8% gain over the past week, though it remains 62.7% below its 52-week high. The endorsement followed a conference call with the company’s management last week, which provided clarity on several complex aspects of the business. According to InvestingPro data, the stock currently trades near its Fair Value.

New Fortress Energy, which operates in the energy infrastructure sector, has been grappling with high levels of debt, with a debt-to-equity ratio of 5.06 and total debt of $9.5 billion. InvestingPro analysis reveals a concerning Financial Health Score of 2.08 (FAIR), highlighting the urgency of balance sheet improvement. The imminent sale of its Jamaica operations is seen as a critical first step in this process, with an announcement expected within the next couple of weeks.

The second step outlined by the analysts involves New Fortress Energy repaying its debt. The third and final step is to convert the capital that has already been invested into growth in cash flow. Despite the risks associated with the company’s credit profile, Stifel analysts are optimistic that New Fortress Energy can successfully enhance liquidity and cash flows, which appears increasingly probable.

The analysts described New Fortress Energy as a "binary name" due to its credit profile, indicating that the outcome for the company could go strongly in either direction. However, they believe that the potential for upside outweighs the downside risk if the company can follow through on its plans to improve its financial standing and cash flow.

In other recent news, New Fortress Energy reported its fourth-quarter 2024 earnings, showcasing a notable performance by exceeding analyst expectations. The company achieved an earnings per share (EPS) of $0.13, surpassing the forecast of $0.06, and reported revenue of $679 million, which was significantly higher than the projected $547.68 million. Despite these positive results, the company faced a substantial net loss of $240 million for the quarter. New Fortress Energy has also secured a $1.27 billion credit agreement, which includes amendments to existing credit facilities and new financial obligations to support its ongoing projects and corporate needs. Additionally, Stifel analysts adjusted their outlook on New Fortress Energy by reducing the stock’s price target from $23.00 to $19.00 while maintaining a Buy rating, citing the company’s strong adjusted EBITDA performance. The analysts noted the company’s progress in asset sales and refinancing activities, particularly in Jamaica, Puerto Rico, and Brazil, which are expected to enhance cash flow. These developments indicate that New Fortress Energy is actively pursuing growth opportunities while managing financial restructuring to support its strategic initiatives.

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