We initiate on NFE with a Strong Buy rating and $20 PT. New Fortress Energy is a globally integrated gas-to-power infrastructure network, delivering LNG to power off takers through a mix of terminals and FSRUs.
While sector sentiment remains anchored on past operational disruptions and an elevated debt profile, we see underlying growth drivers laying the groundwork for a significant earnings inflection. Beneath the skeptics, NFE is entering its most cash-generative phase, as Brazil and FLNG assets achieve full run-rate and LT contracts (~20-25 years) shift a greater portion of the topline to recurring cash flow.
We are notably above consensus on FY25E/FY26E revenue, with explicit assumptions on project ramp milestones and the step-change from asset acquisitions (providing $95mn Q2 '25 uplift & sustainable 5% organic topline trajectory). This underlines our forward EV/Sales multiple of 5.3x (vs. depressed current multiple of 4.7x), as we see the market underappreciating the scale and permanence of NFE's contracted topline growth vs. the historical build story.
The company's transition to recurring infrastructure cash flow, combined with insider buying and consensus lag, supports our conviction that the market's focus on headline debt overlooks the underlying transformation. Execution risk around project timelines and refinancing remains, but the valuation offers ample cushion for these execution hurdles, providing asymmetric upside to even base case projects hit their stride.
We see a rare skew in R/R, where operational execution and BS progress can drive outsized risk-adjusted returns from current discounted entry.