Bechtel contract puts Sabine Pass expansion in focus

Cheniere Energy (LNG) has signed a US$4.69b contract with Bechtel for the first phase of its Sabine Pass LNG expansion, putting a sizable new capital project on investors’ radar.

The agreement covers engineering, procurement, and construction for Train 7 and related infrastructure. Early work has already been authorized, and a final investment decision is targeted by early 2027.

At a share price of US$235.37, Cheniere’s stock is down about 14% on a 1 month share price return and roughly 6% on a 3 month share price return. Its 5 year total shareholder return of about 180% points to meaningful longer term gains, and the current volatility may reflect shifting views on future LNG project execution and contract visibility rather than a clear break in the story.

If this kind of large scale energy build out has your attention, it could be a good moment to scan other power related infrastructure opportunities through the 33 power grid technology and infrastructure stocks

With Cheniere trading at US$235.37 and analyst targets sitting higher, the recent share price weakness together with reported revenue and net income growth raises a simple question: is this a reset that offers upside, or is the market already pricing in future expansion?

Most Popular Narrative: 26.7% Undervalued

At a last close of $235.37 versus a narrative fair value of $320.94, the most followed view on Cheniere points to meaningful upside based on long term cash generation.

The Business in Simple Terms

Cheniere operates the largest LNG export terminals in the US, Sabine Pass and Corpus Christi. They liquefy natural gas, load it onto tankers, and ship it to buyers in Europe and Asia under long-term contracts. Think of it as a toll road: Cheniere gets paid a fixed fee per unit of LNG processed regardless of commodity prices. The commodity price risk sits with the buyer.

Want to see why this toll road style model underpins that higher fair value? The narrative leans heavily on contracted volumes, robust margins and a future earnings profile that looks more like a mature infrastructure utility than a cyclical commodity exporter.

Result: Fair Value of $320.94 (UNDERVALUED)

However, this view can be challenged if US export policy tightens, or if geopolitical tensions around the Strait of Hormuz ease more quickly than markets currently expect.

Another Lens: Earnings Multiple Sends A Different Signal

That 26.7% “undervalued” fair value from the narrative sits awkwardly next to how the stock is priced on earnings. At a P/E of 33.8x versus a peer average of 18.6x and a fair ratio of 31.6x, the stock sits above both its sector and the level our model suggests the market could move toward. For you as a shareholder, that richer multiple can mean less room for error if growth or margins fall short. How comfortable are you paying a premium where others see value?

Next Steps

With the story drawing both optimism and concern, it can be useful to move quickly and test the narrative against the numbers yourself. A good starting point is the key trade offs highlighted in the 2 key rewards and 3 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.