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Here's Why Hold Strategy is Apt for Liberty Energy Stock for Now
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Liberty Energy Inc. (LBRT - Free Report) is a significant player in the energy sector, particularly in the oil and natural gas industry. As a leading provider of hydraulic fracturing services, the company plays a vital role in facilitating the extraction of oil and gas, especially from unconventional sources like shale. Its broad range of services, including proppant delivery, sand mining, well site fueling and data analytics, enables energy companies to efficiently produce and manage their resources.
Operating in key basins across North America, including the Permian, Eagle Ford and Marcellus Shales, LBRT is crucial to the continued growth and development of the U.S. energy sector. The Denver-based equipment and services provider company’s strategic involvement in sand mine operations, which supply the proppant used in hydraulic fracturing, gives it a competitive advantage, allowing for more control over the supply chain.
Moreover, LBRT’s investment in advanced technologies and data analytics further enhances its role in optimizing the hydraulic fracturing process, providing clients with valuable insights to improve efficiency and safety. Recently, the company announced the acquisition of IMG Energy Solutions, a well-established developer of distributed power systems.
Due to its size and significance in the industry, LBRT attracts considerable attention from investors. While the company boasts numerous strengths, there are also potential risks that need to be weighed before making any investment decisions. Let us take a closer look at the factors driving the LBRT stock’s performance, as well as the potential challenges that could affect its prospects.
What is Favoring LBRT Stock?
Strategic Shift to Energy Infrastructure: LBRT is making a strategic shift from being a frac services provider to a broader energy infrastructure company. The company is expanding into power generation, offering modular, distributed power solutions for data centers, EV charging and industrial clients. This reduces its dependency on oilfield services and provides a more stable revenue stream, making LBRT a long-term investment in energy transition.
Commitment to Shareholder Returns: LBRT is highly committed to returning capital to its shareholders. Since 2022, it has repurchased 15.1% of outstanding shares and $294 million remaining in the repurchase program. The company also increased its quarterly dividend by 14% to 8 cents per share. This shows management’s confidence in the company’s future and makes it an attractive option for income-focused and long-term investors.
Competitive Advantage With Technology: LBRT’s digiFleet and digiPrime platforms give it a competitive edge by lowering fuel costs, increasing efficiency and reducing emissions. With the industry moving toward more fuel-efficient, lower-emission fleets, LBRT is well-positioned to gain market share. The company’s AI-driven operational improvements further enhance efficiency, making it a cost leader in frac services.
Modular Power Business Growth Potential: LBRT’s modular power business could significantly increase valuation if it successfully scales up. The company is planning to deploy 130 MW in 2025 and expand to 400 MW by 2026. If the power business succeeds, LBRT will no longer be seen as just an oilfield services stock but as an energy infrastructure provider, leading to higher investor interest and long-term stock price appreciation.
Frac Services Industry Consolidation: The frac services industry is consolidating, with many older fleets retiring due to high maintenance costs. As supply tightens, LBRT could regain pricing power, especially for next-gen fleets, leading to higher profitability in late 2025 and beyond. This makes LBRT a potential turnaround play, offering a strong upside once frac pricing rebounds.
Potential Risks for LBRT Stock
LBRT Underperforms Oil Sector and Peers: LBRT's share price has significantly underperformed both the Zacks Oil and Energy sector and the Field Services Oil and Gas sub-industry. Over the past six months, the stock has dropped 23.2%, while the sector saw a modest increase of 0.8% and the sub-industry rose 5.9%. In comparison to its peers, including Baker Hughes (BKR - Free Report) , TechnipFMC (FTI - Free Report) and Archrock (AROC - Free Report) , LBRT’s share price has underperformed.
Six-Month Price Performance Comparison
Image Source: Zacks Investment Research
Short-Term Growth Concerns: LBRT expects 2025 adjusted EBITDA to decline to $700-$750 million, down from $922 million in 2024. This guidance indicates weaker frac pricing, which may limit stock performance in the short term. Investors seeking immediate earnings growth may want to wait for stronger demand signals before increasing exposure.
Cash Flow Pressure From Growth Investments: LBRT is investing $650 million in CapEx in 2025, including $200 million for power infrastructure. While this positions the company for growth, it may reduce short-term free cash flow, limiting further buybacks or dividend hikes. Investors who prioritize cash flow over growth investments may find LBRT’s spending strategy too aggressive in the near term.
Power Business Execution Risks: LBRT is new to the power generation market, competing with large, established energy companies. Scaling this business will take time and capital. If execution delays occur, expected earnings from power generation could be pushed beyond 2026. Investors should monitor contract signings and project progress to assess whether this business can deliver the anticipated returns.
Continued Exposure to Oilfield Services Cyclicality: Despite diversifying into power, LBRT’s core revenues still depend on oilfield services, which are highly cyclical. If oil prices decline, frac demand could weaken further, impacting revenues. While long-term diversification helps, investors should recognize that LBRT is still exposed to energy market volatility in the near future.
Verdict for the LBRT Stock
LBRT shows potential with its strategic shift toward energy infrastructure, including expanding into power generation, which could provide more stable revenues in the long term. The company is also committed to shareholder returns, with significant share buybacks and dividend increases.
However, LBRT has underperformed its peers and the broader sector recently. Its short-term growth prospects are challenged by weaker frac pricing and pressure on cash flow from substantial growth investments. Additionally, the company faces execution risks in scaling its new power generation business and remains exposed to the cyclical nature of the oilfield services market.
Image: Shutterstock
Here's Why Hold Strategy is Apt for Liberty Energy Stock for Now
Liberty Energy Inc. (LBRT - Free Report) is a significant player in the energy sector, particularly in the oil and natural gas industry. As a leading provider of hydraulic fracturing services, the company plays a vital role in facilitating the extraction of oil and gas, especially from unconventional sources like shale. Its broad range of services, including proppant delivery, sand mining, well site fueling and data analytics, enables energy companies to efficiently produce and manage their resources.
Operating in key basins across North America, including the Permian, Eagle Ford and Marcellus Shales, LBRT is crucial to the continued growth and development of the U.S. energy sector. The Denver-based equipment and services provider company’s strategic involvement in sand mine operations, which supply the proppant used in hydraulic fracturing, gives it a competitive advantage, allowing for more control over the supply chain.
Moreover, LBRT’s investment in advanced technologies and data analytics further enhances its role in optimizing the hydraulic fracturing process, providing clients with valuable insights to improve efficiency and safety. Recently, the company announced the acquisition of IMG Energy Solutions, a well-established developer of distributed power systems.
Due to its size and significance in the industry, LBRT attracts considerable attention from investors. While the company boasts numerous strengths, there are also potential risks that need to be weighed before making any investment decisions. Let us take a closer look at the factors driving the LBRT stock’s performance, as well as the potential challenges that could affect its prospects.
What is Favoring LBRT Stock?
Strategic Shift to Energy Infrastructure: LBRT is making a strategic shift from being a frac services provider to a broader energy infrastructure company. The company is expanding into power generation, offering modular, distributed power solutions for data centers, EV charging and industrial clients. This reduces its dependency on oilfield services and provides a more stable revenue stream, making LBRT a long-term investment in energy transition.
Commitment to Shareholder Returns: LBRT is highly committed to returning capital to its shareholders. Since 2022, it has repurchased 15.1% of outstanding shares and $294 million remaining in the repurchase program. The company also increased its quarterly dividend by 14% to 8 cents per share. This shows management’s confidence in the company’s future and makes it an attractive option for income-focused and long-term investors.
Competitive Advantage With Technology: LBRT’s digiFleet and digiPrime platforms give it a competitive edge by lowering fuel costs, increasing efficiency and reducing emissions. With the industry moving toward more fuel-efficient, lower-emission fleets, LBRT is well-positioned to gain market share. The company’s AI-driven operational improvements further enhance efficiency, making it a cost leader in frac services.
Modular Power Business Growth Potential: LBRT’s modular power business could significantly increase valuation if it successfully scales up. The company is planning to deploy 130 MW in 2025 and expand to 400 MW by 2026. If the power business succeeds, LBRT will no longer be seen as just an oilfield services stock but as an energy infrastructure provider, leading to higher investor interest and long-term stock price appreciation.
Frac Services Industry Consolidation: The frac services industry is consolidating, with many older fleets retiring due to high maintenance costs. As supply tightens, LBRT could regain pricing power, especially for next-gen fleets, leading to higher profitability in late 2025 and beyond. This makes LBRT a potential turnaround play, offering a strong upside once frac pricing rebounds.
Potential Risks for LBRT Stock
LBRT Underperforms Oil Sector and Peers: LBRT's share price has significantly underperformed both the Zacks Oil and Energy sector and the Field Services Oil and Gas sub-industry. Over the past six months, the stock has dropped 23.2%, while the sector saw a modest increase of 0.8% and the sub-industry rose 5.9%. In comparison to its peers, including Baker Hughes (BKR - Free Report) , TechnipFMC (FTI - Free Report) and Archrock (AROC - Free Report) , LBRT’s share price has underperformed.
Six-Month Price Performance Comparison
Image Source: Zacks Investment Research
Short-Term Growth Concerns: LBRT expects 2025 adjusted EBITDA to decline to $700-$750 million, down from $922 million in 2024. This guidance indicates weaker frac pricing, which may limit stock performance in the short term. Investors seeking immediate earnings growth may want to wait for stronger demand signals before increasing exposure.
Cash Flow Pressure From Growth Investments: LBRT is investing $650 million in CapEx in 2025, including $200 million for power infrastructure. While this positions the company for growth, it may reduce short-term free cash flow, limiting further buybacks or dividend hikes. Investors who prioritize cash flow over growth investments may find LBRT’s spending strategy too aggressive in the near term.
Power Business Execution Risks: LBRT is new to the power generation market, competing with large, established energy companies. Scaling this business will take time and capital. If execution delays occur, expected earnings from power generation could be pushed beyond 2026. Investors should monitor contract signings and project progress to assess whether this business can deliver the anticipated returns.
Continued Exposure to Oilfield Services Cyclicality: Despite diversifying into power, LBRT’s core revenues still depend on oilfield services, which are highly cyclical. If oil prices decline, frac demand could weaken further, impacting revenues. While long-term diversification helps, investors should recognize that LBRT is still exposed to energy market volatility in the near future.
Verdict for the LBRT Stock
LBRT shows potential with its strategic shift toward energy infrastructure, including expanding into power generation, which could provide more stable revenues in the long term. The company is also committed to shareholder returns, with significant share buybacks and dividend increases.
However, LBRT has underperformed its peers and the broader sector recently. Its short-term growth prospects are challenged by weaker frac pricing and pressure on cash flow from substantial growth investments. Additionally, the company faces execution risks in scaling its new power generation business and remains exposed to the cyclical nature of the oilfield services market.
Given this mix of strengths and potential challenges, investors should wait for a more opportune entry point instead of adding this Zacks Rank #3 (Hold) stock to their portfolios. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.