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On Tuesday, JPMorgan issued a downgrade for AGL Energy (OTC:AGLXY) Ltd. (AGL:AU) (OTC: AGLNF) stock, adjusting the rating from Overweight to Neutral. Accompanying this change, the firm also revised the price target for AGL Energy, setting it at AUD12.40, a decrease from the previous target of AUD13.75.
The downgrade comes amidst expectations of a repeat of the prior year's pattern, where strong guidance led to increased consensus estimates. JPMorgan noted that despite a positive long-term outlook for AGL Energy, the immediate future poses challenges due to a lack of new information from the company's management and the influence of seasonally lower electricity prices on the stock's performance.
JPMorgan's cautious stance on AGL Energy is further influenced by the potential impact of another global gas crisis. The firm acknowledges that while electricity and gas prices are closely linked, the current predictions by their global research team point to a less volatile situation with European gas stock levels anticipated to be nearly full by October 2024.
The analyst from JPMorgan highlighted the significant correlation between electricity and gas prices, indicating that the stock's performance could be adversely affected if the market experiences another gas crisis. However, as of now, the outlook for gas supply seems stable with European storage expected to be robust in the coming year.
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