Why Energy Transfer Stock Could Soar to New Highs in 2025

Key Points

• There is a lot of bullish evidence pointing to a potential path for Energy Transfer stock to outperform and start making new highs in 2025. 
• Wall Street analysts agree with a sector breakout, and the fundamentals are all there to connect the dots.
• Institutional capital has also arrived to give markets another bullish gauge to push from with recent buying.

Investors are closing their 2024 year with one thought in mind: how to make 2025 better as a financial year. Working towards this goal starts with having the right components in a portfolio, some of which are clearer than ever today. Wall Street and economic forces are both aligned with the energy sector going into 2025, giving investors a chance to outperform the market this year.

With this in mind, investors need to start by understanding that analysts at Goldman Sachs have placed a positive outlook in oil prices for the year, a theme investors can find inside the bank’s 2025 macro outlook report. More than that, other players in the market have also started to express their bullish view of oil prices in recent months, showing the rest of the market just how much money there is to be made in this space.

This is why a few shifts took place this month in shares of Energy Transfer LP NYSE: ET, making it one of the best energy picks for investors to consider a potential buy-in for the coming quarters. Before the details behind this potential buy are discussed, investors need to have a macro checklist handy so that they can further justify the details behind the Energy Transfer stock momentum.

Bigger Forces Backing Oil Rallies

A few quarters back, Warren Buffett decided to accumulate up to 29% of Occidental Petroleum Co. NYSE: OXY in his own version of a bullish bet for oil to come out ahead in 2025. More than that, Paul Tudor Jones said that oil is an unbelievably cheap commodity today during a recent CNBC interview.

If that wasn’t enough, even hedge funds, in general, have been quietly building up positions in oil futures as their own way to bet on a rally. Now, one of the main catalysts for this oil surge is the potential expansion of United States manufacturing activity, which seems to be at the top of the new administration’s agenda.

More than that, China (representing over 40% of global oil demand) has now reported three consecutive months of manufacturing expansion. Seeing the world’s two largest economies boost their activity is one surefire way to tell oil demand is likely to bounce back higher.

But, out of all the players in the space, investors may wonder why Energy Transfer deserves their attention at all. This is where takes from a few market authorities – and participants – can come in handy when developing a potential buy thesis.

The Market’s Take on Energy Transfer

If price action is any indication of sentiment, then investors can safely assume that the market is favoring Energy Transfer stock right now, as it has managed to trade up to 98% of its 52-week high. More than that, the thesis and momentum behind energy have pushed other forces to work in favor of this company as well.

Such a theme can be reiterated through the recent institutional buying activity. As of January 2025, those at Cushing Asset Management LP decided to boost their holdings in Energy Transfer stock by as much as 4.0%, which may not sound like much on a percentage basis, but it did bring their net position to a high of $148.6 million today.

To be taken as another sign of potential bullishness in the stock moving forward, investors can build further upon this fact and check on the company's recent 15.9% decline in short interest over the past month alone, which shows bearish capitulation in the face of all of this upside potential.

And then comes one of the main benefits Energy Transfer is offering to its shareholders. Due to the underlying tailwinds in the industry, management has justified paying up to $1.29 per share in dividends, which at today’s price translates into an annualized dividend yield of up to 6.2%.

This way, investors can still generate cash flow and liquidity when holding Energy Transfer stock. At the same time, they wait for these bullish developments to start playing out. What is even better for investors is the current valuation multiples seen in the stock.

Even though it has outperformed on a price action basis, its price-to-earnings (P/E) ratio is still sitting at 15.6x, well below the industry’s 35.1x average multiple today. Despite having lots of tailwinds, momentum, and price action behind it, Energy Transfer stock still trades at a significant discount that investors can exploit this year.