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NextDecade (NEXT) stock is in focus after the company reported a wider quarterly net loss, progress on its Rio Grande LNG project, and a new equity shelf registration tied to employee stock offerings.
See our latest analysis for NextDecade.
Despite progress at Rio Grande LNG, NextDecade's share price has eased in the short term, with a 30 day share price return of down 11.23% and a 90 day share price return of down 14.18%, while the year to date share price return is up 24.91% and the 5 year total shareholder return is up 123.26%. This suggests that long term holders have seen stronger gains than recent traders.
If this kind of LNG exposure interests you, it can be useful to compare it with other energy infrastructure ideas, starting with 88 nuclear energy infrastructure stocks
NextDecade's share price has cooled even as Rio Grande LNG moves ahead and the stock trades about 38% below the average analyst target. The question is where a reasonable view of fair value sits in that gap.
On the latest close at $6.72, the most followed narrative for NextDecade points to a fair value of $9.40, which frames the current analyst debate around the stock.
Early cargo sales of over 175 trillion BTUs at expected margins of more than US$3 per MMBtu and the company's projection that approximately 3,800 TBtus of early LNG volumes could generate US$1.2b to US$2b of distributable cash flow provide a defined path to use near term cash inflows to reduce term loans and corporate level leverage, which can support future net income.
The fair value call on NextDecade leans heavily on how quickly those early Rio Grande LNG volumes translate into revenue scale, margin expansion and a future earnings multiple that sits well below the broader US oil and gas sector. It also raises questions about which specific growth and profitability assumptions need to align for that view to hold and how much of the potential upside depends on later project phases and step ups in economic interest.
Result: Fair Value of $9.40 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, the NextDecade story still hinges on smooth Rio Grande LNG construction and robust long term LNG demand, so delays, weaker margins or slower contracting could quickly challenge that 28.5% undervalued narrative.
Find out about the key risks to this NextDecade narrative.
With both risks and rewards in play for NextDecade, it makes sense to move quickly, review the underlying data yourself, and then weigh the 1 key reward and 3 important warning signs.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include NEXT.
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