Friday, UBS has upgraded Atlantica Sustainable Infrastructure (NASDAQ:AY) stock from Neutral to Buy, adjusting the price target upward to $25.00 from the previous $19.00.
The firm highlighted the company's renewable development pipeline as a key factor for the upgrade, projecting a 9% compound annual growth rate (CAGR) in cash available for distribution (CAFD) from 2024 to 2028. This marks a notable increase from the 2% year-over-year growth observed from 2022 to 2023.
The analysis by UBS suggests that the growth will be supported by what they consider relatively conservative return and success rate assumptions. The report acknowledges the risks associated with the cost and availability of equity proceeds necessary to fund development spending beyond 2024.
Nonetheless, UBS points out that investors stand to benefit from Atlantica's attractive 10% estimated distribution yield for 2024, as they await a more favorable funding environment.
The upgrade comes with an optimistic outlook for Atlantica Sustainable Infrastructure, as the company's strategic review continues. UBS indicates that the outcome of this review could serve as a near-term catalyst for the stock. The firm's analysis underscores the potential for investors to see increased value as clarity emerges from the strategic review process.
Atlantica Sustainable Infrastructure operates in the production of renewable energy, efficient natural gas, transmission lines, and water assets. The company's focus on sustainable and long-term infrastructure investments aligns with a growing trend in the energy sector towards renewable sources. The UBS report suggests that Atlantica is well-positioned to capitalize on this trend with its development pipeline.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.