Energy Transfer LP (NYSE:ET) has surged by almost 30% since the beginning of 2026, propelled by its strong performance, high natural gas demand in the US, and new pipeline opportunities from data centers.
The stock has also now received a fresh vote of confidence from Wall Street. On September 10, Stifel resumed coverage of ET with a ‘Buy’ rating and a price target of $25, implying an upside of 16% from the current levels. The firm views Energy Transfer as an undervalued and diversified midstream player with multiple avenues for future growth. While near-term growth capital spending remains elevated, the analyst believes that the company is well-positioned to benefit from several favorable trends, including the rising natural gas demand from the power sector, incremental Permian Basin gathering and processing and egress opportunities, and continued global growth in NGL exports.
Multiple Engines of Growth:
Energy Transfer is positioned to benefit from several long-term trends in the US energy market. The country’s natural gas demand is expected to remain high as power consumption rises to record levels, particularly from data centers and AI infrastructure. The midstream operator is also rapidly expanding its natural gas pipeline network to supply direct, on-site power to high-demand data centers, potentially giving it an additional source of long-term fee-based revenue.
The growing production in the prolific Permian Basin is also a major growth catalyst, as rising volumes require additional gathering, processing, transportation, and export infrastructure. This allows Energy Transfer to participate in production growth without the same commodity-price exposure as upstream producers.
Energy Transfer’s NGL business is also benefiting from the rising export demand. In Q2, the company’s NGL transportation volumes were up 13% YoY, and its NGL exports were up 25% YoY, both setting new records for the partnership. ET expects to spend between $5.6 billion and $5.9 billion in organic growth capital expenditures in 2026, with much of it directed toward natural gas and NGL infrastructure.
Energy Transfer’s high shareholder returns also add to its appeal. The company currently boasts an annual dividend yield of 6.31% and is targeting a long-term annual distribution growth rate of 3% to 5%.
Heavy Spending Raises the Stakes:
The biggest concern is the amount of capital Energy Transfer is deploying to capture its growth opportunities. Large infrastructure projects require substantial upfront funding and often face permitting, construction, and timing risks. Any delays or cost overruns can significantly impact the financial returns.
There is also a risk that the expectations surrounding data center-driven gas demand may be overly optimistic. Although hyperscalers are currently spending enormous amounts of cash to build out their data center infrastructure, the eventual economic returns from these investments still remain uncertain. If AI spending cools or projects are scaled back, the resulting decline in power demand could also reduce the need for additional natural gas infrastructure.
Conclusion:
Stifel’s bullish stance reinforces the investment case for Energy Transfer, supported by the strong gas and NGL demand and data center opportunities. However, the company’s elevated capital spending and a potential slowdown in AI-related demand remain key concerns. Overall, ET’s attractive yield and growth prospects make the stock appealing for income-focused investors.
Market Sentiment:
Energy Transfer LP was held by 32 hedge funds in the Insider Monkey database at the end of Q2 2026, with a total investment value of around $705 million. This is down from 34 hedge fund investors with a total stake value of just over $710 million in the previous quarter.
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This article is originally published at Insider Monkey.
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