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Why Cheniere Energy Is Weak ahead of 2Q17 Earnings

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Dec. 4 2020, Updated 10:53 a.m. ET

Cheniere Energy’s market performance

Cheniere Energy (LNG) had a weak month in July. It fell a huge 7.2%, and the weakness continues in August. Overall, it has fallen 8.2% since the beginning of July. At the same time, Cheniere Energy’s MLP subsidiaries, Cheniere Energy Partners (CQP) and Cheniere Energy Partners LP Holdings (CQH), have fallen 9.0% and 1.7%, respectively. The Alerian MLP ETF (AMLP), which is comprised of 25 energy MLPs, has risen 0.80% during the same time frame.

Cheniere Energy’s recent weak performance could be attributed to the weak Asian LNG (liquefied natural gas) spot prices and the rise in geopolitical tensions in the Korean Peninsula. Japan, South Korea, and China are currently among the largest LNG buyers in the world.

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Cheniere Energy’s YTD performance

The recent falls have significantly eroded Cheniere Energy’s YTD (year-to-date) gains. It has risen 7.9% YTD as of August 3, 2017. Cheniere Energy Partners and Cheniere Energy Partners LP Holdings have risen 0.90% and 18.1%, respectively. However, Cheniere Energy is still outperforming AMLP and the energy sector in general in 2017. AMLP and the Energy Select Sector SPDR ETF (XLE) have fallen 5.7% and 13.1%, respectively, in 2017. Cheniere Energy is outperforming AMLP and XLE by 1,360 and 2,100 bps (basis points, respectively.

Cheniere Energy’s price forecast

Cheniere Energy’s 30-day implied volatility was 27.0% as of August 3, 2017. Its peers Kinder Morgan (KMI) and Energy Transfer Equity (ETE) have implied volatilities of 17.4% and 31.0%, respectively, as of August 3, 2017. By comparison, the Alerian MLP ETF (AMLP) has an implied volatility of 15.3%.

Cheniere Energy might trade at $43.05–$46.39 in the next seven days based on its August 3, 2017, closing price of $44.72. Its stock price is expected to be within this range 68.0% of the time using a standard deviation of one and assuming a normal distribution of prices.

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