Energy Transfer: Buy, Sell, or Hold

Core Viewpoint - Energy Transfer has shown strong stock performance, rising over 17% this year and nearly doubling since the end of 2021, prompting investors to consider whether to buy, sell, or hold the stock [1] Buy Case for Energy Transfer - The company has a robust growth outlook with a planned expenditure of $3.1 billion on growth projects in 2023, indicating solid visibility into future growth [2] - Energy Transfer has been actively consolidating the industry by acquiring smaller rivals, enhancing its integrated system's value [3] - The company is well-positioned to meet increasing energy demands from AI data centers, having signed agreements to supply more gas to power companies [4] - Energy Transfer has improved its balance sheet, reporting a distribution coverage ratio of over 1.8 times based on non-consolidated distributable cash flow [5] - The stock trades at a forward enterprise-value-to-EBITDA multiple of 8 times based on 2025 estimates, significantly below historical averages and one of the lowest in the MLP sector [6] Sell Case for Energy Transfer - The company previously cut its distribution in half in 2020 due to high debt levels, raising concerns about potential future overextension [7] - Historical shareholder-unfriendly practices under former CEO Kelcy Warren may still impact investor sentiment, despite recent governance changes [8] - The company's reliance on fossil fuel transportation could face long-term challenges from the transition to green energy, although the pace of this transition appears to be slowing [9] Hold Case for Energy Transfer - With a forward yield of 7.9%, the stock offers a solid return for income-oriented investors, who may appreciate its current stability despite limited volatility [10] Verdict - Given its growth potential, financial discipline, and attractive valuation, Energy Transfer is viewed favorably for investment, especially if it can demonstrate benefits from the AI sector [11]