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On Thursday, Bernstein SocGen Group raised the price target on Enel (BIT:ENEI) SpA (ENEL:IM) (OTC: ENLAY) to EUR8.30, up from the previous EUR8.10, while maintaining an Outperform rating. The stock, currently trading at $7.78 and near its 52-week high of $8.01, has shown strong momentum with a 21.36% return over the past year. According to InvestingPro analysis, the stock appears fairly valued at current levels. The revised price target follows an update to their financial model which now includes the full-year 2024 results, recent exchange rate fluctuations, and the ongoing positive regulatory review in Argentina.
According to the analyst, Enel is on a clear path to enhance the visibility of its earnings. With a robust EBITDA of $23.56 billion in the last twelve months and an impressive InvestingPro Financial Health Score of 3.16 (rated as GREAT), the company demonstrates strong operational performance. The forecast for EBITDA from fiscal year 2025 to 2027 has been increased by an average of 0.6%. This adjustment takes into account a revaluation of Latin American assets, as well as Endesa (BME:ELE), leading to the price target increment.
The analyst highlighted that distribution capital expenditures have become a central investment focus for Enel, representing 54% of the company’s gross investment in fiscal year 2024. This percentage is expected to grow to as much as 68% by fiscal year 2027. Consequently, the proportion of regulated network EBITDA in Enel’s total is projected to increase from 35% in fiscal year 2024 to 40% in fiscal year 2027.
The report also mentions ongoing regulatory processes in Italy, Spain, and Brazil, which are anticipated to result in substantial growth in the Regulatory Asset Base (RAB) and higher earnings. These potential outcomes have not been fully factored into current estimates by analysts, consensus, or Enel’s own guidance.
The valuation of Enel remains appealing, with the possibility of a re-rating. Currently trading at a P/E ratio of 10.76x and maintaining dividend payments for 26 consecutive years, the stock continues to trade at a discount compared to historical levels on a 1-year forward Price-to-Earnings (P/E) basis, which is 11% lower, and at a wider-than-average discount to Iberdrola (OTC:IBDRY). However, due to Enel’s strategic focus on electricity distribution networks and the gradual increase in earnings visibility, the analyst believes there is potential for further re-rating of the stock. For deeper insights into Enel’s valuation metrics and 10+ additional ProTips, visit InvestingPro.
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