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Investing.com -- Barclays upgraded Endesa SA (BME:ELE) to “Overweight” from “Equal Weight” and raised its price target by 9% to €26.4 per share given a potential extension of nuclear plant operations in Spain.
The brokerage also increased its earnings forecasts for Endesa by an average of 5%, reflecting stronger retail margins and higher EBITDA contributions from retail activities.
Analyst notes suggest that Endesa stands to benefit the most from a potential nuclear renaissance in Spain, as the country approaches a critical decision on extending the life of its nuclear plants.
Endesa is more exposed to this theme, considering that it is 100% focused on the Iberian market.
The deadline for applying for a 10-year life extension of the Almaraz 1 nuclear plant, the first affected by the planned nuclear shutdown, is set for Q4 2025. A decision to extend the plant’s lifespan would require a new agreement with the Spanish government, replacing the 2019 nuclear shutdown deal.
Barclays (LON:BARC) noted that renegotiating the shutdown plan would be a “win-win” for stakeholders.
For consumers and Spanish government, keeping nuclear plants operational would help ensure security of supply and ease upward pressure on power prices.
For utilities, lowering nuclear taxes would encourage Endesa and Iberdrola (OTC:IBDRY) to seek extensions, reversing the industry's voluntary decision to shut down nuclear plants due to high taxation.
The brokerage expects Endesa to maintain its strong integrated unit margin beyond 2025, positioning the company for further growth.
Despite accelerating capital expenditure, Endesa is forecast to continue growing dividends over the next three years, thanks to its low-leverage balance sheet.
Barclays reiterated its “Equal Weight” rating on Iberdrola and raised its price target by 2% to €13.7 per share, saying the stock has already priced in most of the value of its renewables pipeline.
The brokerage also reiterated its “Equal Weight” rating on Naturgy Energy and increased its price target by 1% to €25.5 per share, citing limited upside due to high exposure to gas networks and uncertainty around the future shareholding structure.
