Energy Transfer LP (NYSE:ET) owns and operates one of the largest and most diversified portfolios of energy assets in the United States, with more than 125,000 miles of pipeline and associated energy infrastructure. The stock was held by 34 hedge fund investors at the end of Q1 2026 in the Insider Monkey database, up from 30 in the prior quarter. However, while the total number of hedge fund investors increased, their total stake value slightly decreased from $718 million in Q4 2025 to $710 million in the first quarter.
Energy Transfer’s Natural Gas Demand Could Pay Off Big:
Energy Transfer LP (NYSE:ET) topped top- and bottom-line estimates in its Q2 report on August 4, with the company’s revenue growing by over 164% compared to last year. Adjusted EBITDA surged by 31% YoY, while distributable cash flow also increased by 32%. As a result, the company raised its adjusted EBITDA guidance for the full-year 2026 to the range of $18.8 billion to $19.1 billion, up from $18.2 billion to $18.6 billion previously.
As a diverse midstream energy operator, ET is uniquely positioned to capitalize on the high demand for natural gas infrastructure amid the AI boom. Natural gas supplies around 43% of the total electricity in the US, and this number is expected to increase amid the soaring power demand from data centers. Energy Transfer has already signed long-term agreements to supply data-center projects and recently had two customers add a combined 100 MMcf/d to their existing contracts for natural gas services to their power plant or data center sites in Texas. The booming American LNG exports mark another important growth catalyst, with buyers around the world scrambling to find alternative supply amid the disruptions in the Middle East.
Energy Transfer also reported that its Hugh Brinson Pipeline is now online ahead of schedule, with full phase 1 capacity expected by September 1. This is one of the company’s most important projects, as it moves natural gas from the West Texas Permian Basin to access points throughout Texas and connects it with its other pipelines to reach additional states. The project is expected to provide incremental earnings and cash flows in the coming years.
Energy Transfer’s NGL business has also witnessed strong growth, with transportation volumes and exports up 13% and 25% YoY, respectively, in Q2, setting a new company record. As a result, the segment’s adjusted EBITDA surged 30% to $1.3 billion during the quarter. Moreover, the company completed upgrades to its Lone Star Express pipeline in Q2, while its planned Nederland expansion will add 240,000 bpd of ethane export capacity and 5,000 bpd of additional LPG capacity.
ET’s high dividend yield of 6.35% further adds to its appeal. The company raised its quarterly dividend by 0.7% in July, marking its 19th consecutive increase in quarterly cash distribution. The midstream operator is targeting a long-term annual distribution growth rate of 3% to 5%.
Given the strong earnings and solid growth prospects, Morgan Stanley boosted its price target on EP from $23 to $25 on August 18, indicating an upside potential of almost 17% from the current levels.
Big Growth Plans Bring Big Risks:
Energy Transfer LP (NYSE:ET) is targeting to spend $5.6 billion to $5.9 billion on growth capital in 2026. While the company’s expansion projects are expected to contribute significantly to future earnings, they also carry substantial funding requirements and execution risk.
Moreover, while a significant portion of ET’s earnings comes from fee-based infrastructure, certain businesses remain exposed to the volatility in commodity prices and market conditions.
Regulatory approvals are also an important risk factor. It was reported on August 14 that Energy Transfer’s proposed gas pipeline to power a planned Oracle data center has been delayed by nearly six months, due to obstacles in certification on both the state and federal level. The project even faces the risk of cancellation if progress is not made in the coming months.
Conclusion:
Overall, Energy Transfer LP (NYSE:ET)’s solid financial performance, raised guidance, exposure to rising natural gas demand, and high shareholder returns bolster its investment case. However, the company’s heavy capital requirements, regulatory challenges, and market volatility remain key concerns.
While we acknowledge the risk and potential of ET as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ET and that has 10,000% upside potential, check out our report about this cheapest AI stock.
READ NEXT: Here is Why Analysts are Bullish on Occidental Petroleum and Here is Why Chevron (CVX) is a Favorite Among Hedge Funds
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center