EDF: Credit Suisse says sell stock
(CercleFinance.com) - Credit Suisse does not believe in the French electro-nuclear group EDF, with analysts initiating their coverage of the stock this morning with a sell ("underperform") rating, believing that its massive outperformance (+45% since the beginning of the year) relative to the European energy sector is unjustified.
The broker's target price of 13 euros suggests downside potential of around 10%.
Due to its recent performance and forecasts of electricity prices, “we view EDF as expensive,” Credit Suisse laments. Analysts say that they “disagree with the consensus view that EDF is one of the best proxies for power price rises in Europe as only roughly one-third of the French output is directly exposed to merchant prices”.
Admittedly, EDF, whose capital is still 83.7%-held by the French State, holds a lot of value. Although only a split of the company (like the case in Germany) and/or a, overhaul of the French electricity market could realise this. And this is at a time that the State could decide to delist the EDF share to lead a "pure" industrial strategy.
Credit Suisse says that other factors playing against the EDF stock include its weak free cash flow. In addition, "we worry the government might force EDF to invest in value-destroying new nuclear capacity without regulatory help to bolster a struggling industry".
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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.
The broker's target price of 13 euros suggests downside potential of around 10%.
Due to its recent performance and forecasts of electricity prices, “we view EDF as expensive,” Credit Suisse laments. Analysts say that they “disagree with the consensus view that EDF is one of the best proxies for power price rises in Europe as only roughly one-third of the French output is directly exposed to merchant prices”.
Admittedly, EDF, whose capital is still 83.7%-held by the French State, holds a lot of value. Although only a split of the company (like the case in Germany) and/or a, overhaul of the French electricity market could realise this. And this is at a time that the State could decide to delist the EDF share to lead a "pure" industrial strategy.
Credit Suisse says that other factors playing against the EDF stock include its weak free cash flow. In addition, "we worry the government might force EDF to invest in value-destroying new nuclear capacity without regulatory help to bolster a struggling industry".
Copyright (c) 2018 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.