Citi’s initiation of coverage on NextDecade (NEXT) has put fresh attention on the stock, as investors weigh the firm’s view against approaching milestones at the company’s Rio Grande LNG project in Texas.

At a share price of US$7.91, NextDecade has seen short term momentum cool with a 7 day share price return that declined 6.5%, but the 90 day share price return of 46.75% and 5 year total shareholder return of 224.18% point to a stock where sentiment has shifted meaningfully over a longer window.

If Citi’s coverage has you looking beyond a single LNG project, this is a good moment to see what else is moving in related infrastructure through the 33 power grid technology and infrastructure stocks

With Citi’s coverage now in focus and the stock trading about 19% below one analyst price target of US$9.40, the key question is whether you are seeing mispricing here or a market that is already pricing in future growth.

Most Popular Narrative: 9.6% Undervalued

Analysts following NextDecade see a fair value of $8.75 per share, compared with the recent $7.91 close. This frames Citi’s initiation against an already detailed LNG build out story.

Early cargo sales of over 175 trillion BTUs at expected margins of more than US$3 per MMBtu and the company’s projection that approximately 3,800 TBtus of early LNG volumes could generate US$1.2b to US$2b of distributable cash flow provide a defined path to use near term cash inflows to reduce term loans and corporate level leverage, which can support future net income.

Want to see what sits underneath that early cargo maths and LNG capacity build out plan? The core of this narrative is aggressive revenue growth assumptions, a step change in margins and a future earnings profile anchored to a specific multiple and discount rate. Curious which levers carry the most weight in that $8.75 fair value and how long they are expected to run?

Result: Fair Value of $8.75 (UNDERVALUED)

However, you still need to factor in risks such as potential construction delays at Rio Grande LNG and the company’s reliance on heavy project finance debt.

Next Steps

Seeing both optimism and concern in this story so far? Take a moment to weigh the upside against the red flags and review the 1 key reward 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.