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Investing.com -- Morgan Stanley downgraded Enel (BIT:ENEI) to Equal-weight from Overweight, saying the utility’s recent rally and well-telegraphed near-term catalysts leave limited room for further outperformance, while its long-term strategic direction remains uncertain.
The bank said the upcoming Italian electricity concession extension and recently announced €1 billion buyback, the first tranche of a broader €3.5 billion program, are already largely priced in. It estimates those moves may only lift consensus EPS by about 4% by 2028.
Enel shares trade at 10.9 times 2026 earnings, a discount to integrated peers. But Morgan Stanley (NYSE:MS) sees that discount as justified, pointing to weak earnings growth, forecasting EPS CAGR of just 2% from 2024 to 2030, and limited visibility into the company’s next phase of strategy ahead of its capital markets day in March 2026.
Since current management took over in May 2023, Enel has delivered strong returns through asset sales and deleveraging, but Morgan Stanley noted the disposal story is now largely complete and reinvestment options remain unclear.
The firm also flagged risks around the sustainability of Enel’s 70% dividend payout ratio, given pressure on free cash flow.
Despite a forecast total shareholder return of 9% through 2030, Enel still lags peers offering higher growth or higher yield, the broker said.
Morgan Stanley sees potential upside only if Enel sustains or expands its buybacks beyond current plans or revisits M&A, but cautioned that falling energy prices or rising bond yields in Italy could also pose downside risks.