E.On: Jefferies downgrades stock
(CercleFinance.com) - Broker Jefferies has degraded its rating on German energy giant E.
ON. Previously recommending investors hold the stock, it now says "sell" ("underperform"), having cut its corresponding target price from 9.5 euros to 8.2 euros.
"Even with a large-scale restructuring through the asset swap with RWE, we think E.ON would deliver only c.5% 2018-22 EPS CAGR," the broker says in a report. At issue: "the challenges facing its downstream businesses, especially in retail," which concentrates 30% of the new E.ON's recurrent EPS.
"Although the German retail market is complex, it does appear that competition is growing gradually and larger players losing market share," Jefferies deplores. Therefore, to win clients, E.ON risks having to slash its prices. In addition, in the UK, where E.ON has a market share (number 2 in the country) of 20%, the broker says the situation is "challenging".
In short, Jefferies believes that the consensus on E.ON is over-optimistic, with the stock's premium of about 8% relative to its sector seeming "unjustified".
Copyright (c) 2019 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.
ON. Previously recommending investors hold the stock, it now says "sell" ("underperform"), having cut its corresponding target price from 9.5 euros to 8.2 euros.
"Even with a large-scale restructuring through the asset swap with RWE, we think E.ON would deliver only c.5% 2018-22 EPS CAGR," the broker says in a report. At issue: "the challenges facing its downstream businesses, especially in retail," which concentrates 30% of the new E.ON's recurrent EPS.
"Although the German retail market is complex, it does appear that competition is growing gradually and larger players losing market share," Jefferies deplores. Therefore, to win clients, E.ON risks having to slash its prices. In addition, in the UK, where E.ON has a market share (number 2 in the country) of 20%, the broker says the situation is "challenging".
In short, Jefferies believes that the consensus on E.ON is over-optimistic, with the stock's premium of about 8% relative to its sector seeming "unjustified".
Copyright (c) 2019 CercleFinance.com. All rights reserved.
The information and analyses distributed by Cercle Finance are only intended as decision-making support for investors. Cercle Finance's responsibility may not be entailed, either directly or indirectly following the use of such information and analyses by readers. Any non-professional investor is recommended to consult a professional advisor before making any investment decision. This indicative information in no way constitutes any invitation to sell or buy securities.