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Thursday, Raymond (NSE:RYMD) James initiated coverage on TransAlta (NYSE:TAC) Corporation (TA:CN) (NYSE: TAC), assigning a Market Perform rating to the company’s stock with a price target of Cdn$12.00. The firm's analysis indicates a tempered expectation for the company's strategic shift towards thermal energy opportunities and data centers, particularly in Alberta, as well as a capacity play in Washington.
According to Raymond James, TransAlta is redirecting its focus from renewable energy projects to thermal opportunities, including the development of data centers in Alberta. The firm also noted the potential for TransAlta to benefit from its operations in Washington. However, the analyst expressed skepticism about the likelihood of large technology companies moving into the area given the current macroeconomic climate. InvestingPro data shows the company maintains strong fundamentals with a 40% gross profit margin and has maintained dividend payments for an impressive 38 consecutive years.
The Market Perform rating suggests that the analyst sees the stock trading in line with market or sector performance in the near future. The price target of C$12.00 per share implies a modest total shareholder return of negative 2 percent, reflecting the analyst's view that the stock is currently trading slightly above the value of its existing portfolio and potential non-data center upside. With a beta of 0.55, the stock has shown lower volatility than the broader market, while maintaining a healthy free cash flow yield of 13%.
The report also highlighted that while TransAlta's shares have recently pulled back, investors looking for a near-term catalyst to drive significant stock appreciation might have to be patient. The analyst's comments indicate a cautious stance on the stock, with the current market conditions and strategic choices by TransAlta contributing to this outlook.
TransAlta Corporation's stock performance will continue to be monitored by investors as the company progresses with its strategic initiatives and responds to market conditions.
In other recent news, TransAlta Corporation has announced strong financial results for the year 2024, along with an increase in dividend payments. This decision reflects the company's confidence in its financial health and commitment to delivering shareholder value. The corporation also provided guidance for 2025, indicating expectations for its financial and operational performance. Additionally, TransAlta will host its Annual Meeting of Shareholders and a conference call to discuss the first quarter results of 2025, although specific financial details were not disclosed in the announcement.
BMO Capital Markets has maintained an Outperform rating and Top Pick designation for TransAlta, citing potential growth in Alberta's energy consumption and the company's favorable position in the data center market. The firm reiterated its price target of Cdn$22.00, with a potential increase if certain conditions are met. Furthermore, TransAlta has initiated an Automatic Share Purchase Plan (ASPP) to facilitate share repurchases during blackout periods, aligning with its strategy to return value to shareholders.
The company also disclosed its annual financial statements for 2024, providing a detailed look at its financial condition and operations. These developments highlight TransAlta's proactive approach to capital management and transparency with investors.
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