Stock market today: S&P 500 rides Apple-led tech rally to close higher
On Friday, BofA Securities updated its assessment of Terna SpA (BIT:TRN:IM) (OTC:TERRF), a leading Italian electric utility company, by increasing the price target to €8.20 from the previous €8.00. Despite the improved price objective, the firm maintained its Underperform rating on the company’s shares.
The revised valuation comes after a thorough review of Terna’s investment case and financial estimates. BofA Securities analyst Marcin Wojtal acknowledged Terna’s strong execution in the face of a favorable regulatory environment. This environment included a positive decision from the Italian Regulatory Authority for Energy, Networks, and Environment (ARERA) concerning inflation indexation and the provision of higher-than-expected output-based incentives over the past two years.
However, Wojtal noted several concerns that underpin the decision to maintain the Underperform rating. First, he observed that Terna’s leverage is projected to increase through 2028, which could limit the company’s flexibility in capital allocation. Secondly, a mark-to-market analysis for the Weighted Average Cost of Capital (WACC) for the year 2026 indicates a year-over-year reduction of 23 basis points, which is close to the 30 basis points threshold that could trigger concerns, given that consensus and Terna’s Business Plan assume a stable WACC.
Lastly, when compared to its industry peers, Terna’s valuation appears to be fully accounted for, suggesting limited upside potential from the current market price. In light of these factors, while the price target has been slightly raised, the Underperform rating suggests a cautious perspective on the stock’s future performance.
In terms of financial forecasts, BofA Securities has raised its earnings per share (EPS) estimates for Terna by 1-2% for the years 2025 and 2026. The adjustments reflect the latest data and expectations regarding the company’s financial trajectory in the coming years.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.