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On Tuesday, Jefferies analyst Julien Dumoulin-Smith downgraded AES Corp stock from Hold to Underperform, adjusting the price target to $9.00 from the previous $10.00. The revision comes as the stock experienced a 15% increase in value over the past week following a new tax bill proposal. According to InvestingPro data, AES shares are currently trading at $11.71, representing a 42% decline over the past year.
Dumoulin-Smith expressed concerns about the company’s future, particularly in the renewable sector. He pointed to the potential slowdown in the renewable business outlook starting in 2027 and beyond. While the analyst cited the stock’s current valuation at approximately 13 times EV/EBITDA as high, InvestingPro analysis indicates the stock is currently undervalued, despite trading at this multiple and maintaining a P/E ratio of 6.38x. The platform’s comprehensive analysis reveals 8 additional key insights about AES’s valuation metrics.
The downgrade is also influenced by uncertainties surrounding AES Corp’s credit rating. Jefferies’ decision reflects a cautious stance on the company’s financial health and market position. InvestingPro data shows AES operates with a significant debt burden, with a debt-to-equity ratio of 8.99x, though the company maintains a 6.01% dividend yield and has raised its dividend for 13 consecutive years.
In his commentary, Dumoulin-Smith mentioned that, alongside the downgrade, estimates were modestly cut. This adjustment in expectations is aligned with the revised price target and rating.
AES Corp, listed on the New York Stock Exchange under the ticker (NYSE:AES), will now be navigating the market with a more conservative outlook from Jefferies. The firm’s analysis suggests investors may need to recalibrate their expectations for the energy company’s performance in the near term.
In other recent news, AES Corporation announced its first-quarter 2025 financial results, reporting an adjusted earnings per share (EPS) of $0.27, which fell short of the forecasted $0.49. The company’s revenue also missed expectations, coming in at $2.93 billion compared to the anticipated $3.16 billion. Despite these shortfalls, AES’s stock experienced a rise in after-hours trading, likely influenced by the reaffirmation of its 2025 guidance, which includes an expected EPS range of $2.10 to $2.26. The company also highlighted significant growth in its renewable energy sector, with a 45% year-over-year increase in EBITDA.
Additionally, AES’s strategic initiatives include the completion of several renewable projects and a robust pipeline of future developments. The company plans to sign 4 gigawatts of power purchase agreements (PPAs) in 2025, aiming for a total of 14-17 gigawatts by 2027. From an analyst perspective, AES’s financial strategies, such as the sale of its insurance business, have received positive feedback, indicating a creative approach to financing. The firm also addressed potential risks, including tariff exposures and changes to the Inflation Reduction Act, but remains confident in its supply chain strategies to mitigate these challenges.
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