The shares of Navigator Holdings (NYSE:NVGS) jumped 14% in February according to data provided by S&P Global Market Intelligence. More than half of that rise, however, occurred on just one day. Little material news was released by the natural gas shipper, and the jump had nothing to do with earnings, nor with announcements of progress on its big growth project (more on that below). It was all about investors' perceptions about the company's future.
The big price jump was driven by Morgan Stanley analyst Fotis Giannakoulis, who upgraded the stock from equal weight to overweight in the middle of the month. For a company with a market cap of around $600 million, it's not surprising that what amounts to a buy call from a major Wall Street firm would be followed by a share price surge.
The underlying story here is that the Morgan Stanley analyst expects Navigator Holdings to benefit from increasing demand for liquified natural gas around the world. Natural gas is increasingly being used in electric power plants because it's cleaner burning than coal. That fact should lead to higher demand over time as utilities lean on the fuel to help facilitate their transition to green energy sources like solar and wind.
Also important in the upgrade was the joint venture between Navigator Holdings and $60 billion market-cap midstream giant Enterprise Products Partners L.P. (NYSE:EPD). The two are building an ethylene export facility that should be up and running by the end of 2019. Although that's just one of many projects that Enterprise is working on, it's major for the comparatively tiny Navigator Holdings. Once complete, the facility should further boost the company's outlook -- another positive pointed out by Morgan Stanley.
Although nothing specific happened at Navigator Holdings, the upgrade by Morgan Stanley was enough to push its stock smartly higher. You, of course, should take any analyst's calls with a grain of salt, and do your own homework. In this case, Navigator Holdings has an interesting story to tell. As a relatively small company in the global energy market, it may not be a good option for risk-averse investors -- for them, an investment like Enterprise would probably be a better fit. But for more aggressive types, a deep dive into the investment thesis for Navigator would be worth the effort -- even if you don't end up buying it.