TD Cowen downgraded NextDecade Corp to Hold from Buy and lowered its price target to $8 from $11 due to higher-than-expected equity financing for its Rio Grande LNG expansion and concerns over long-term gas pricing.
The brokerage said NextDecade’s latest disclosures showed Train 4 and 5 of the Texas project would be funded with about 40% equity, compared with the 25% it previously assumed.
That shift reduces the cash available to shareholders in the early years, cutting about $2 a share from Cowen’s valuation.
The firm also questioned assumptions in the company’s own $14-a-share valuation, which relies on spot marketing margins that imply global gas prices around $10 per million cubic feet.
Cowen expects new supply to push prices closer to $8, which would trim another $2 a share from value.
“Stock should move with global gas prices moving forward,” the analysts wrote, adding that weaker-than-expected margins during the initial ramp-up could also slow debt repayment and weigh on shareholder returns.
NextDecade, which recently reached a final investment decision on Train 4, has said it expects to generate $2 billion in cash during the ramp-up of its first five trains.
Cowen said lower gas price assumptions cut that by about half.
Source :
https://www.investing.com/news/stock-market-news/nextdecade-downgraded-by-td-cowen-on-higher-project-equity-needs-gas-price-risk-4239220
