Morgan Stanley has revised its industry assessment of the global gas and liquefied natural gas (LNG) sector, lowering its stance from In-Line to Cautious as it anticipates the market moving toward oversupply. The firm said this transition should exert downward pressure on margins for open cargo sales and curb demand for new long-term sale and purchase agreements.
The investment bank expects that the change in market balance will also slow the pace of final investment decisions (FIDs) and overall sector growth. In Morgan Stanley's view, these dynamics favor businesses with exposure to downstream demand trends rather than those with direct commodity price exposure.
Excelerate Energy highlighted
Within this revised framework, Morgan Stanley named Excelerate Energy as a relative winner. The bank raised its price target on Excelerate Energy Inc (NYSE:EE) to $40 from $30, while maintaining an Equal-weight rating on the shares.
Morgan Stanley’s rationale centers on Excelerate’s limited direct exposure to commodity price swings and the potential for the company to benefit from stronger downstream demand growth. The updated price target reflects two elements cited by the bank: greater growth in its base-case projections and adjustments to discount rates tied to recent changes in regional market risk premiums.
On specific near-term financial projections, Morgan Stanley forecasts $114 million of EBITDA for Excelerate in the fourth quarter of 2025, which it notes is about 3% higher than consensus estimates. For full-year 2026, the firm projects $544 million of EBITDA, likewise roughly 3% above consensus.
What to watch next
Morgan Stanley said it expects more disclosure around fleet expansion plans and growth projects from Excelerate in the coming quarters, which could shed further light on the company’s trajectory. Despite the raised target, the bank left its Equal-weight rating unchanged because the shares have rallied roughly 50% year-to-date, bringing the stock close to Morgan Stanley’s view of fair value.
Recent company actions and broker reactions noted in connection with Excelerate include a board authorization of a share repurchase program of up to $75 million. Separately, Raymond James upgraded the company to Strong Buy and Jefferies raised its price target to $40.
Implications for investors and markets
The bank’s sector downgrade signals a more cautious tone for participants exposed to LNG and global gas markets, particularly those whose margins depend on open cargo sales and new long-term contracts. Firms with business models tied to downstream demand patterns may be relatively better positioned under the scenario Morgan Stanley outlines.
Investors should monitor forthcoming disclosures from companies about project pipelines and fleet plans, as well as how equity markets price stocks that have already posted significant year-to-date gains.