Wall Street frequently ignores a certain type of business until the numbers become too compelling to ignore. It is possible that Energy Transfer LP is getting close to that point. The partnership, which was trading at about $19 on the NYSE in mid-June 2026, reported first-quarter revenue of $27.77 billion, which exceeded analyst estimates by about two percentage points and represented a 32% increase year over year. However, the unit price remains quietly, almost obstinately, below what a number of valuation models indicate it is worth. The disconnect is difficult to ignore.
By almost all measures, the Q1 headline numbers are impressive. Operating income increased by 20% from the same period in 2025 to $2.98 billion, the highest amount in the previous eight quarters. Adjusted EBITDA increased from about $4.1 billion a year ago to about $4.9 billion. Driven by record throughput at the Mont Belvieu fractionation complex near the Gulf Coast, the NGL and refined products segment—the business of transporting and fractionating petroleum gases—alone produced approximately $1.2 billion in EBITDA. These figures don’t belong to a business that charges like a drowsy utility.
A number of elements that seem almost perfectly suited to Energy Transfer’s current infrastructure are driving volumes. The demand for natural gas from AI data centers is increasing more quickly than most people thought two years ago. Infrastructure executives seldom make mistakes when describing the company’s positioning, as co-CEO Mackie McCrea did: Energy Transfer inked new contracts to provide the Nexus Hubbard AI hyperscale campus in Central Texas with about 150 million cubic feet of natural gas per day. Data centers’ behind-the-meter gas supply is no longer a fringe tactic. Energy Transfer’s pipeline network, which stretches throughout the Gulf Coast and into North Texas, is at the heart of this developing structural system.
It gets really interesting—and possibly a little confusing—in the valuation story. Energy Transfer has a P/E ratio of about 15.9x, which is higher than the overall U.S. oil and gas industry average of 14x but lower than its peer average of 18.8x. While some analysts consider that to be reasonable, others consider it to be a blatant discount. According to a discounted cash flow model, units are trading at a nearly 60% discount to long-run cash flows, with an estimated intrinsic value of about $46. According to TIKR’s own model, the stock should reach a more conservative price target of $26 by year-end 2030, which would indicate a total return of about 38% from current levels. It’s important to recognize that these figures don’t all agree with one another. Models of valuation are not judgments.
Honesty is also due to the risks. One issue that frequently appears in analyst commentary is interest coverage. The distribution yield, which is currently between 7 and 8%, is not entirely covered by trailing free cash flows, raising concerns about long-term viability in the event that earnings stagnate. The Dakota Access Pipeline controversy sparked years of legal disputes and investor scrutiny regarding environmental and indigenous rights issues, and this legacy continues to affect how ESG-focused funds approach the stock. Energy Transfer also has a history of reputational weight. The unit price may have been suppressed more than the basic cash flow picture suggests due to those overhangs.
At the halfway point, management increased the full-year 2026 adjusted EBITDA guidance by $750 million to a range of $18.2 billion to $18.6 billion. Genuine confidence in the pipeline volumes that are materializing is reflected in that significant upward revision. It’s still unclear if the market will eventually catch up to that updated forecast. Value-oriented investors believe that Energy Transfer is a business that the market as a whole hasn’t adequately priced for the energy demand environment that is actually developing, one that is characterized more by the urgent, ravenous power requirements of artificial intelligence infrastructure than by the timeline of the energy transition.
As this develops, it makes sense to wonder how long the discount will last. There are some complications in the story. However, compared to six months ago, the Q1 2026 data presented a more compelling argument.
