The consensus of analysts had abandoned its confidence in the utilities Spanish companies and has not given any stock market buy recommendations among the companies that make up the sector. Until now. Iberdrola recovers the recommendation to buy its shares for the first time since the beginning of June and becomes the only one in the sector to hold it sign. All this, even with its price at historic highs.
Usually, a company of this caliber is trading at the highest levels in its history, which means that experts recommend being more cautious in their advice on what to do with the shares, in this case Iberdrola. Until now, analysts suggested maintaining positions in the company, but the unstoppable performance of its shares has shown that, for the moment, this investor euphoria with Iberdrola has no sign of ending and experts have once again recommended taking with their titles and not missing the fervor.
His current advice is also the best he has received since the end of last year and he is thus positioning himself as 15th best recommendation of the Ibex 35as stated in The League of Ibex (the combined elEconomista.es which is prepared with the averages of the recommendations of Bloomberg and FactSet), a tool in which it also reached its best position since June.
The change in recommendation also has its justifications and reasons which suggest that the route of the utility on the stock market has not yet stopped. The recent acquisition by the green company of the British ENW for 5 billion euros (Iberdrola’s largest purchase since 2008) has been one of the most recent catalysts for both investors and experts. In fact, only since the day the sale was made official (early August), The electricity company revalued itself by more than 11.5% on the Spanish stock exchange.
The purchase of this electricity distribution company will contribute to the expansion of the company’s gross profits. Iberdrola itself forecasts a compound annual growth rate of EBITDA of between 10 and 12% for the period 2024-2026 and predicts that by 2026, the transmission networks will contribute between 1,300 and 1,500 million euros, which means that 40% of the expected profit growth for these years will come from the networks, as Berstein explains.
The investment bank also highlights the installation capacity of renewable energies, with a particular focus on offshore wind (at sea), as another of the company’s stimuli. Only in September, Iberdrola has won two offshore wind contracts in the United States and two in the United Kingdom for a total of almost 2,000 MWwhich contributes to achieving the objectives of their Strategic Plan 2024-2026, in which they plan to allocate more than half of their renewable investments (15.5 billion euros) to offshore projects under construction. All this “while the high level of hydroelectric reservoirs in Spain is currently significantly stimulating hydroelectric production,” they add from Bernstein.
Thanks to these factors and taking into account the increase accumulated by the stock (a little more than 14% over the year), they are up to par six analysts who ventured to value Iberdrola shares above 14 euros which, based on current prices, would leave the company with upside potential of 3% or more (the average target price of the experts’ consensus, of 13.44 euros, leaves the stock without potential). The Morgan Stanley analysis team is the one that is most optimistic about the company and its shares, reaching a price of 15.50 euros in the coming months. “This valuation incorporates the growth of ENW, the two new offshore wind projects and the MTM effect (marketing) commodity prices, compared to a lower RFR (risk-free rate),” Morgan Stanley argues its price target and recommends buying its shares. With this price, Iberdrola would not only set new historical highs again, but with it would approach 100 billion euros in market capitalization. Also from Goldman Sachs, they see the group’s shares at 15 euros and recommend their purchase on the stock market, justifying that “investors can continue to put pressure on it due to its quality, taking into account the upward risk of a mid-single digit that we see that the consensus on EPS (2025-26E) and its secular profitability are between 5 and 10%.
In addition, the award also finds support in the figures presented by the company chaired by Ignacio Galán. It should be noted that this year an extraordinary income statement is expected due to the impact of the sale of assets in Mexico and that it will be normalized in the coming years. Thus, in the first half of 2024, the electricity company’s profits reached a record of 4.134 million euros, 64% more than the same period of the previous year.
