Cheniere Energy (LNG -0.73%) and its two affiliates, Cheniere Energy Partners Holding (NYSEMKT: CQH) and Cheniere Energy Partners (CQP), have been riding high this year, with all three stocks recently touching 52-week highs. Fueling that bullish buying is a combination of factors, including Cheniere Energy's robust first-quarter results and reports that it is in talks to increase liquefied natural gas shipments to China.

All this bullishness certainly raises the question of whether investors should wait for a pullback before investing in Cheniere or one of its affiliates. While that patience might pay off if there is a sell-off, investors who look at the bigger picture might still want to buy even though the stock is at the high.

Liquid natural gas  tank under construction.

Image source: Getty Images.

The trains are just starting to roll out

Cheniere Energy is in the midst of a transformation from an LNG project developer into a global LNG exporting powerhouse. Driving that shift is the start-up of commercial operations at the first of its Sabine Pass liquefaction trains last November. It has since completed two more trains that should start commercial deliveries later this year. In the interim, these trains combined to load 43 LNG cargoes during the first quarter, which includes seven commissioning cargos. Those shipments enabled Cheniere and its affiliates to record $1.2 billion in revenue in the quarter, which is a stratospheric rise for a franchise that only produced $69 million in revenue during last year's first quarter. Meanwhile, Cheniere recorded $483 million in adjusted EBITDA, a remarkable amount for a company that posted a negative $45 million in adjusted EBITDA during last year's first quarter.

Those strong results are only the beginning. That's because it didn't start commercial activities on Train 3 until the end of the quarter. Meanwhile, Cheniere just started commissioning activities on its newest expansion, Train 4, which it expects to complete later this year. Because of that staggered start, revenue and earnings should steadily rise for the next few years from these four trains alone.

However, Sabine Pass is just the first of its LNG export developments. Cheniere also has a project at Corpus Christi under construction, with the first of its two trains expected to enter service in the first half of 2019 and 2020, respectively. Meanwhile, it has another train at Sabine Pass that should enter service in late 2019. Once all those trains come on line, Cheniere will be the fifth-largest LNG export company in the world. That said, it still has more expansions in development, including another fully permitted train at both Sabine Pass and Corpus Christi and it recently bought land adjacent to Corpus Christi to develop two more trains. 

Fully loaded LNG tanker underway.

Image source: Getty Images.

Capturing a colossal opportunity

The company has most of its financial growth locked up since it has signed 20-year take-or-pay contracts with customers for 87% of total capacity, which includes trains both completed and under construction. However, while it intends to hold back at least 5% of capacity to capture opportunities in the spot market, it would jump at the chance to sign additional capacity to long-term contracts. 

That's where recent news that Cheniere has had extensive negotiations with China about increasing LNG shipments to the country might prove to be another catalyst for the stock. To date, it has sold nine cargos to China since it started exporting gas last February, though all were spot market volumes as part of its commissioning process. Ideally, Cheniere would like to secure long-term contracts with China for some of its available capacity as well as for the trains it hasn't started constructing because they're not yet fully commercialized. 

China would be an ideal destination for this capacity given that it's expected to drive LNG demand growth over the next decade. According to a report from leading LNG producer Royal Dutch Shell (RDS.A) (RDS.B), global LNG demand should rise 4% to 5% annually through 2030, driven in large part by China's desire to boost LNG imports as a percentage of its energy mix from 5% to 15%. If that were to happen, China would represent 20% of total global LNG demand, according to Shell. Because of that forecast, the country represents an enormous untapped market opportunity for Cheniere. 

Investor takeaway

Cheniere Energy is riding high these days thanks to the stunning growth it has experienced since completing its first three LNG trains. That said, it still has unprecedented growth ahead of it given the trains it still has under construction and in development, which would only heighten if it can finally start making inroads into the rapidly growing Chinese market. Because of this, investors who buy at the high could still be rewarded handsomely by holding for the long term and letting the thesis play out.