ASX-listed company AGL Energy Limited’s (AU:AGL) shares were down by 4.8% on Wednesday and reached their lowest point in the last two weeks. The shares slumped after the Australian broker, Macquarie, downgraded the rating on the stock from Buy to Hold. The broker also reduced the price target for the stock from AU$11.59 to AU$11.43. The downgrade reflects the upcoming headwinds for the energy company, which could possibly impact earnings over the next two years.
Over the last six months, the share price has surged by 55%, mainly pushed by its Q2 earnings in February 2023. Analysts are optimistic about the stock and have given it a Strong Buy rating, but they believe the share price may have limited upside potential.
AGL Energy is an Australian energy company that caters to over 4 million customers with electricity and gas services. The company is a leading developer of renewable energy in Australia and owns a diverse portfolio of hydro, wind, biomass, etc.
The Downgrade
Analyst Ian Myles from Macquarie stated that the share price has already factored in the future growth prospects for the company based on its growth rally in 2023. Additionally, the company will witness a peak in its electricity prices, which will push earnings in fiscal year 2024 but is unlikely to continue in 2025.
Myles believes electricity prices have started to fall since June, hit by a demand-supply imbalance due to higher coal generation in Queensland and New South Wales in Australia. Moreover, weak coal prices are also contributing to a decline in electricity prices.
Additionally, Macquarie has lowered the electricity pricing forecast, resulting in an approximately 15% reduction in the company’s profit estimate of AU$585 million for FY 2025. Myles further decreased the FY 2026 profit forecast by 15% to AU$562 million.
What is the AGL Stock Price Prediction?
16 days ago, contrary to the recent downgrade, J.P. Morgan analyst Mark Busuttil upgraded his rating on the stock from Hold to Buy. His price target of AU$14.3 implies an upside potential of 22.3% in the share price.
According to TipRanks’ consensus forecast, AGL stock has a Strong Buy rating based on six Buy versus one Hold recommendations.
At an average target price of AU$12.09, analysts suggest a modest growth of 3.5% on the current price.
