Should You Buy Energy Transfer While It Trades Below $20?

Core Viewpoint - The energy midstream sector is currently favorable, with Energy Transfer (ET) identified as a strong investment opportunity as it trades under $20, approximately 10% off its January 2025 highs [1][14] Industry Environment - The midstream energy sector benefits from a supportive regulatory environment prioritizing fossil fuels over green energy alternatives, alongside increased energy demand driven by artificial intelligence (AI) workloads [2] - The Permian Basin, a key area for oil and natural gas production, is experiencing challenges in natural gas takeaway, leading to low natural gas prices, which Energy Transfer can capitalize on [5][6] Company Positioning - Energy Transfer owns one of the largest integrated midstream systems in the U.S. and has a significant presence in the Permian Basin, allowing it to leverage increasing volumes and emerging projects [3] - The company has access to inexpensive natural gas from the Permian, which is in demand from power companies and data centers [6] Growth Strategy - Energy Transfer has increased its capital expenditure budget to $5 billion for growth projects in 2025, up from $3 billion in 2024, indicating a shift towards a growth-oriented phase [7] - Key projects include the Hugh Brinson Pipeline to enhance natural gas takeaway and a partnership with CloudBurst to supply natural gas to an AI data center in Central Texas [8] Future Projects - The company plans to make a final investment decision on the Lake Charles LNG project by year-end, which could open international market opportunities and has a 20-year agreement with Chevron contingent on project approval [9][10] Valuation Metrics - Energy Transfer's stock is currently valued at under $20, with an EV/EBITDA multiple of less than 8.3 times based on 2025 analyst estimates, which is lower than its peers and historical averages [11][13][14] - The company offers a forward yield of 6.9%, making it an attractive investment option in the current growth environment [14]