By Teresa Rivas

Pull up your favorite AI chatbot and ask it about the weather for this weekend, how to score the best holiday deals, or to tell you the meaning of life. You've just helped the bull case for Expand Energy.

The company, created by the 2024 merger of Chesapeake Energy and Southwestern Energy, is now the nation's largest natural-gas producer. With an advantageous geographic footprint, ongoing synergies flowing to the bottom line, and growing energy demand, it also looks like one of the best buys in the industry.

"The outlook for natural-gas demand is pretty strong," says Ben Cook, portfolio manager of the Hennessy Midstream fund. "There's an increasing need for it as a fuel source for the power generation facilities that deliver electricity to data centers, and you can't flip the switch on alternatives like nuclear energy overnight.

"Geographically, Expand Energy has an advantage as most of its assets are in northwest Louisiana and the Haynesville Shale, giving it proximity to most of the liquefied natural gas, or LNG, export capacity that is being built out," Cook says.

That will be increasingly valuable as the amount of natural gas produced goes up. Projecting from current projects, LNG export capacity could double by 2029, the U.S. Energy Information Administration notes, as sustained prices incentivize higher production.

Expand Energy, which is using its robust cash position to do more drilling, is at the forefront of that push.

"Expand Energy offers attractive free-cash-flow growth from rising prices and volumes in 2025-2026 as deferred wells are brought online and synergies are realized," writes Morgan Stanley analyst Devin McDermott, whose price target on the stock is $135, up from a recent $104.39.

While the company originally projected some $400 million in annual synergies after its merger, that figure has come in ahead of targets. McDermott pegs it at roughly $600 million a year by the end of 2026 and estimates its free-cash-flow yield will climb from 9% in 2025 to 16% next year. That will also help fund its base and variable dividend yield, which was 3.1% over the past year, as well as ongoing stock buybacks, under its late-2024 $1 billion repurchase authorization.

Benchmark analyst Subash Chandra made a similar point in reiterating a Buy rating in early October. The company can grow margins from gas marketing, "as the country's largest gas producer can add meaningfully to free cash flow." he wrote. "We expect the strategy will be fleshed out in ensuing quarters through strategic acquisitions of assets and personnel. Transformation is less the goal than incremental and sustainable growth in free cash flow."

Likewise, consensus estimates call for Expand Energy's earnings to jump by more than two-thirds, from $5.69 in 2025 to $9.63 in 2026. Analysts are by and large an optimistic bunch, but it's worth noting that nearly 90% of the 33 tracked by FactSet rate Expand Energy at Buy or the equivalent -- there are no bearish calls on the Street -- and the average analyst price target of $131 implies 25% upside from current levels.

Investors might be concerned with Expand Energy's volatility, given the stock dropped some 22% from its peak in June through the middle of September. Yet those declines were largely a function of a decline in natural-gas prices, driven in no small part by unfavorable weather trends. That should reverse with a more normal winter, says Cook, and, of course, artificial-intelligence demand isn't weather-dependent.

Global data-center electricity demand is expected to more than double between 2024 and 2030, with much of that coming from AI. Electricity demand from AI-optimized data centers is projected to more than quadruple by 2030. The U.S. is the single largest market for data-center growth.

In fact, the stock has begun to rebound from its summer lows, but Expand Energy still changes hands for a modest 11 times 2026 earnings, despite strong expected growth.

UBS analyst Josh Silverstein raised his estimates ahead of Expand Energy's earnings results, due on Oct. 28, noting that another catalyst could be an update in the search for a new chief financial officer after the departure of the previous CFO in August. Despite the volatility, he says Expand Energy is still "best positioned for rising natural-gas prices next year with the ability to increase volumes and shareholder returns while also reducing debt."

In short, winter is coming. But instead of being a warning, it's welcome news for Expand Energy. Its shareholders may not be able to keep their heating bill from skyrocketing, but they can still profit from it.

Write to Teresa Rivas at teresa.rivas@barrons.com

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October 23, 2025 08:00 ET (12:00 GMT)

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