Clearway Energy shares get buy rating amid valuation discount

On Friday, Jefferies initiated coverage on Clearway Energy (NYSE:CWENa) Inc. (NYSE:CWEN) with a Buy rating and set a price target of $35.00. The firm highlighted Clearway (NYSE:CWEN) Energy's standout performance in the renewable infrastructure sector, emphasizing its consistent and reliable growth pattern.

This initiation comes as the company has shown resilience, recovering from its March lows, and continues to trade at a valuation below what Jefferies estimates based on discounted cash flow (DCF) analysis.

Clearway Energy, which operates in the renewable energy space, has been recognized for achieving steady growth despite the industry's challenges, such as missed targets and downward revisions faced by peers. The firm's confidence in Clearway is bolstered by the company's ability to meet its 5-8% dividend growth target through 2026 without the need for additional corporate capital.

The analyst from Jefferies also pointed out the potential for further growth opportunities for Clearway Energy in California. The company has contracted upside in the state, which could extend its growth runway beyond current projections. This aspect of the business is seen as a positive differentiator in the market.

Despite the positive outlook and recovery since March, Clearway Energy's stock is still seen as undervalued by Jefferies when applying their DCF valuation method. This suggests that the current market price does not fully reflect the company's growth prospects and financial stability.

Jefferies' coverage initiation and price target announcement reflect a positive view on Clearway Energy's financial health and future performance within the renewable energy sector. The firm's analysis indicates a belief that the company is well-positioned for continued growth and is currently trading at an attractive price point for investors.

In other recent news, Clearway Energy Inc. has been making significant strides. Citi initiated coverage on Clearway Energy with a Buy rating, noting the company's potential for new client acquisition and a multi-product transition that is expected to support a higher net revenue retention. The firm also highlighted the company's cost efficiency gains from General Artificial Intelligence and the emerging revenue opportunities associated with it.

In financial developments, Clearway Energy confirmed a strong second quarter during their earnings call. The company reaffirmed its 2024 cash available for distribution (CAFD) guidance of $395 million and is on track to achieve its dividend per share growth target of 5-8% through 2026 without the need for external capital. Clearway Energy has also made strategic investments in renewable projects and is actively evaluating merger and acquisition opportunities to bolster its portfolio.

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