Energy Transfer's stock is undervalued below $20

Energy Transfer is a stock in the midstream energy sector that is currently trading below $20, about 10% lower than its highs earlier this year. Despite a recent market decline, this sector has shown resilience, and Energy Transfer stands out as a potential bargain. The company benefits from a favorable environment for energy production. The U.S. administration has prioritized fossil fuels, which bodes well for traditional energy companies. Energy Transfer operates one of the largest midstream systems in the U.S. and is well-positioned to handle increasing demand, especially from industries relying heavily on energy, such as artificial intelligence. The Permian Basin is critical for Energy Transfer. While it mainly produces oil, it also generates a large amount of natural gas, often considered a byproduct. Due to regulations, flaring is limited, meaning more natural gas needs to be transported. Energy Transfer can transport this cheap natural gas to various locations, attracting interest from power companies and data centers. The company is increasing its capital spending, budgeting $5 billion this year to support new projects. Notable developments include the Hugh Brinson Pipeline, which will enhance natural gas supply from the Permian, and a partnership with CloudBurst to supply natural gas to an AI data center in Texas. Additionally, Energy Transfer plans to move forward with a liquefied natural gas project, Lake Charles LNG, which could open new international markets. From a financial perspective, Energy Transfer's stock looks appealing. It has an enterprise value-to-EBITDA ratio of under 8.3 times for 2025. This is lower than its peers and reflects a good valuation. Historically, similar companies averaged a higher multiple. Overall, Energy Transfer presents a solid buying opportunity, especially considering its growth potential and a 6.9% forward yield for investors.