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On Tuesday, Citi analyst Jenny Ping revised the price target on EDP Renovaveis SA (ELI:EDPR:LI) (OTC: EDRVF), lowering it to €11.30 from the previous €17.70. Despite the reduction, the firm maintains a Buy rating on the stock. Ping’s commentary reflects a shift in market sentiment towards EDPR, noting a transition from growth pricing to a discount on existing assets. According to InvestingPro data, the stock currently trades at a P/E ratio of 131.8, while maintaining impressive gross profit margins of 77.1%. InvestingPro’s Fair Value analysis suggests the stock may be undervalued at current levels.
The analyst acknowledges the current challenges faced by EDPR, including the sentiment around U.S. Inflation Reduction Act (IRA) and interest rate headwinds. The stock has declined 38.5% over the past six months, as revealed by InvestingPro data, which offers 8 additional investment tips for subscribers. Ping argues that the negative valuation of EDPR’s cash-generative assets is unwarranted, despite the company’s recent cash burn. She suggests that management actions could potentially initiate a positive reevaluation of the company’s stock.
Ping outlines several strategies that EDPR could employ to improve market sentiment. These include a share buyback program, being more selective with capital expenditures, the possibility of a buyback by EDP (the parent company and not covered by Citi), or asset sales that could highlight the company’s value in private markets. While acknowledging the risks associated with these strategies, Ping believes they could contribute to reversing the current market sentiment.
Investors and stakeholders are advised to look for updates during the company’s full-year 2024 results announcement scheduled for later this week on the 26th. InvestingPro subscribers can access detailed earnings forecasts and real-time financial metrics to better prepare for the announcement. Citi’s revised sum-of-the-parts valuation now stands at €11.3 per share, a decrease from the previous valuation of €17.7 per share. Despite the removal of unsecured growth from the valuation, Ping still sees potential upside for EDPR shares.
In other recent news, Jefferies has upgraded EDP Renovaveis SA from Hold to Buy, with a revised price target of €13.00, down from the prior €15.50. This adjustment follows a notable 30% decline in the company’s share price. Analyst Arturo Murua of Jefferies cites the current market conditions as presenting an "upside-skewed risk-reward" for EDP Renovaveis. Despite uncertainties in the U.S. market post-elections, Jefferies remains optimistic about the company’s growth outlook in the United States from 2024 to 2026. The firm has taken a more cautious view on growth opportunities beyond 2027 but believes the challenges are manageable. The revised price target reflects confidence in EDP Renovaveis’ ability to navigate these challenges, particularly within the U.S. market, which is crucial for its expansion. This upgrade suggests a potentially favorable investment opportunity, aligning with global trends towards renewable energy.
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