We came across a bullish thesis on New Fortress Energy Inc. (NFE) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on NFE. New Fortress Energy Inc. (NFE)’s share was trading at $9.87 as of March 7th. NFE’s trailing and forward P/E were 8.99 and 212.77 respectively according to Yahoo Finance.
Close-up of a liquefied natural gas terminal expelling plumes of smoke.
New Fortress Energy (NFE) reported $331 million in EBITDA for the quarter, driven by opportunistic cargo sales to Europe and increased production from FLNG1, which has exceeded its nameplate capacity. While initial technical delays affected FLNG1’s launch, operations are now running smoothly. A major political shift in Puerto Rico, with the election of its first Republican governor, has created a significant growth opportunity for NFE. The company currently holds an 80Tbtu contract through March 2026, with 50Tbtu already utilized, but sees the potential to expand Puerto Rico’s demand to 350Tbtu through power plant conversions and long-term contracts. The government has initiated a competitive bidding process for a 10- to 15-year natural gas supply contract, and while NFE’s existing infrastructure gives it a strong competitive position, its ability to maintain margins while securing the deal remains uncertain.
NFE recently restructured incentive payments to its subsidiary Genera, foregoing $1 billion in politically unpopular payments over the next decade. In exchange, NFE secured a one-year extension of its power supply agreement, but further benefits are expected, likely in the form of additional power plant conversion contracts. The new governor is prioritizing lower electricity costs, and NFE has already locked in a 20-year, $100 million annual EBITDA contract for a new Puerto Rican power plant beginning in 2028. Meanwhile, power plant conversions could come online much sooner, generating significant long-term revenue.
Management is guiding for $1 billion in EBITDA for 2025, though prior guidance in September 2024 projected $1.3 billion, including $225 million from Brazil and $175 million from Nicaragua. The downward revision likely accounts for planned asset sales aimed at raising $2 billion to pay down debt. The first target for sale is the Jamaica business, which has stabilized after transitioning the island to natural gas. With $125 million in annual EBITDA secured for 20 years, its valuation could range from $1.2 billion to $1.7 billion, potentially making it the primary contributor to the $2 billion asset sale plan.
Reducing debt by $2 billion would position NFE at a 9.0x EV/EBITDA multiple for 2025, compared to historical trading levels of 14-15x. A return to 15x EV/EBITDA, combined with deleveraging and $1 billion in EBITDA, would imply a market cap exceeding $8 billion, translating to a near-term share price target of $30. Additionally, NFE is considering refinancing high-interest debt, leveraging FLNG1 as collateral. The company also expects over $500 million in cash flow from a FEMA claim, which is included in liquidity forecasts but not in 2025 EBITDA projections.
With excess liquefaction capacity and ongoing construction of import terminals in Brazil, NFE is capitalizing on favorable Dutch TTF natural gas prices by hedging future profits with derivatives—an effective strategy that supports deleveraging without exposing the company to commodity price volatility. Despite negative market sentiment, management forecasts a 50% EBITDA increase over the next two years, setting up a potential 2026 price target of $58.54 based on a 15.0x EV/EBITDA multiple. Notably, this valuation excludes the upside from Puerto Rican power plant conversions, which could materialize rapidly and provide additional catalysts for share appreciation.
New Fortress Energy Inc. (NFE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held NFE at the end of the fourth quarter which was 17 in the previous quarter. While we acknowledge the risk and potential of NFE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NFE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.