Sharp falls in electricity futures since October have not been adequately reflected in the share price of AGL Energy and Origin Energy, according to analysts at Credit Suisse. As such, the investment bank has decided to downgrade both stocks in a note to clients today.
“While one could argue that a fall in wholesale electricity prices was inevitable with prices above new entrant long run, the $A15/MWh fall breaks a trend, and firms a negative underlying earnings outlook post FY20,” it said.
Credit Suisse has downgraded AGL to underperform from neutral with a price target reduction of 40 cent to $18 per share.
For Origin, it has lowered its rating to neutral from outperform. However, it has upped its price target for the stock by 50 cents to $8.90 per share.
“We retain a preference for Origin over AGL despite a 30 per cent 12-month outperformance, of which half can be attributed to Brent,” the investment bank wrote. “We see Origin’s utility business as higher quality, with a better performing retail business and less downside from wholesale price and supply.”
AGL shares are down 0.4 per cent at $20.275. ORG has fallen by a larger 0.9 per cent to $8.68.