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On Tuesday, Citi analysts adjusted their stance on Enel (BIT:ENEI) SpA (ENEL:IM) (OTC: ENLAY), downgrading the stock from 'Buy' to 'Neutral', while maintaining a price target of EUR 7.40. The revision reflects Citi's outlook on the shares now being fairly valued, considering the expected normalization of power prices and retail margins over the next three years.
The analysts noted that Enel's stock continues to trade at one of the lower multiples among integrated utilities. However, they believe that the current stock price adequately reflects the anticipated changes in the market conditions. Enel's net long retail position is expected to offer some short-term protection for its group earnings. Yet, the analysts anticipate that lower commodity prices will eventually have a net negative impact as they affect inframarginal profits and as retail competition intensifies.
Citi's report acknowledges Enel's status as a robust company, indicating that the shares are now appropriately priced based on their projections. The analysts expressed a willingness to re-evaluate their position if there is any unwarranted significant drop in the stock's value.
The price target of EUR 7.40 remains consistent with Citi's previous assessments. This target is based on a 12-month projection, during which the analysts expect the company to perform in line with their current valuation. Enel's stock rating change by Citi is a strategic decision informed by market trends and the company's financial outlook.
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