Street Calls of the Week
Investing.com - Morgan Stanley downgraded EDP Renovaveis SA (EDPR:LI) from Overweight to Equalweight on Friday, while simultaneously raising its price target to EUR13.50 from EUR12.50. According to InvestingPro data, the stock appears overvalued at current levels, with a strong return of 54% over the past six months and impressive gross profit margins of 79%.
The downgrade comes despite Morgan Stanley’s net income estimates remaining approximately 11% above consensus for EDP Renovaveis and about 5% above for parent company EDP over the 2026-2028 period.
Morgan Stanley noted that consensus net income estimates for EDP Renovaveis have shown positive movement in September, increasing by approximately 6% on average for 2026-2028, while EDP-level estimates rose by about 2% during the same period.
The investment bank believes consensus estimates for EDP Renovaveis do not fully account for the company’s increasing U.S. merchant power exposure, which is expected to grow from approximately 2 TWh in 2025 to around 5 TWh in 2028.
EDP is also positioned to benefit from recent improvements in regulatory frameworks in Spain, which implemented a lower-than-expected cut to allowed operating expenses, and Portugal, where the regulator ERSE has proposed an increase in allowed revenues.
In other recent news, EDP Renovaveis has seen its stock rating upgraded by BNP Paribas Exane. The firm has shifted its rating from Neutral to Outperform, reflecting a positive outlook on the company. This upgrade comes with an increased price target, raised from EUR10.00 to EUR14.80. The decision follows several favorable developments for EDP Renovaveis, such as new power purchase agreement signatures. Additionally, the company has experienced milder-than-expected outcomes from U.S. regulations. There has also been an increase in power demand and forward prices, contributing to the positive sentiment. These recent developments highlight the evolving landscape for EDP Renovaveis.
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