APA APA Corporation Common Stock : Bullish and Bearish Analyst Opinions

The speaker explicitly "pounded the table about" APA, stating it was trading at a P/E of about five and 2.5x EBITDA, priced as if nobody will need oil and gas in the future, which he calls "silly." He believes U.S. demand for electricity will come mostly from natural gas because there won't be enough wind and solar to power data centers. APA is "very well positioned for increased demand for natural gas." The stock was extremely undervalued based on a flawed long-term demand assumption. The expected rise in natural gas demand for power generation provides a concrete catalyst for revaluation. A resolution in geopolitical tensions (e.g., Iran) could remove a current source of support for energy prices, though he argues the market's backwardation already reflects such negative expectations.

European Natural Gas is up 40%; Brent is up ~8%. Sen notes that while the Strait of Hormuz isn't physically sealed, it is commercially closed because "insurers are refusing to insure ships." Asia gets 50% of its crude from this region. The market is pricing in a "fear premium," but Sen implies a *physical* supply shock is forming due to the insurance blockade. If ships can't move, supply tightens regardless of production capacity. U.S. producers (XOM, APA) benefit as secure sources of supply. Long Oil Futures (USO) and U.S. Energy Producers (XLE). Yardeni argues the war is "almost over" and prices could crash rapidly if the Strait reopens quickly.

"Energy names also higher... ExxonMobil up more than 1%, Chevron up... APA Corp up 4.3%." WTI is up 7% and Brent up 8%. The conflict involves Iran and the Strait of Hormuz. Any threat to supply routes immediately reprices the commodity (Oil). E&P companies (Exploration & Production) see immediate margin expansion when the underlying commodity spikes, provided they can get the product to market. LONG. Energy acts as a hedge against the inflation caused by the conflict. Demand destruction if the global economy slows; rapid resolution to the conflict.

Charles notes that despite the AI hype, the "biggest source of energy in the US... is natural gas." He highlights that the energy sector has been out of favor and trades at roughly 7x earnings. AI is fundamentally an energy arbitrage trade. You cannot have data centers without electricity, and you cannot scale electricity rapidly without Natural Gas. Therefore, "Old Economy" energy stocks are the hidden infrastructure play for the "New Economy" AI boom. LONG. Deep value (low P/E) combined with secular demand growth from tech. Regulatory shifts against fossil fuels; volatility in commodity prices.