On Friday, Morgan Stanley (NYSE:MS) adjusted its stance on Acciona Energia (ANE:SM), upgrading the stock from Equalweight to Overweight and increasing the price target to €24.00 from €22.00. The change in rating follows a notable decline in the company's share price throughout 2024, which saw a roughly 30% drop.
This decrease was attributed to concerns over the company's significant financial leverage and uncertainties related to the US election, as well as broader questions about the value creation potential in the renewable energy sector and negative earnings momentum.
Morgan Stanley acknowledges that while there remain structural questions surrounding Acciona Energia's equity story, the firm believes that the current share price has factored in most of the negative aspects. The new price target suggests that there is a 21% upside potential for the stock, whereas the bear case scenario indicates a more modest 14% downside risk.
The analyst from Morgan Stanley emphasized that despite the challenges faced by Acciona Energia, the risk-reward profile for the company's shares now leans more favorably towards the upside. This perspective is grounded in the belief that the market has already priced in the various concerns that have previously weighed on the stock's performance.
Investors have been cautious with Acciona Energia due to its high financial leverage and the impact of external factors such as the political climate in the United States. These factors, combined with a general skepticism about the renewable energy sector's ability to generate value, have led to the share price correction observed this year.
The updated price target of €24.00 per share by Morgan Stanley represents the firm's confidence in Acciona Energia's potential for recovery and growth. Despite the acknowledged risks and ongoing structural questions, the financial institution sees a favorable opportunity for investment in the company at its current valuation.
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