Credit Suisse “After an abundance of ample underperformance,” Credit Suisse’s Andrew Kuske upgraded Algonquin Power & Utilities Corp. (AQN-N,
) to “outperform” from “neutral.” seeing “sufficient excess potential return” to his unchanged US$15 target price
“For perspective, AQN’s stock performance of negative 15.8 per cent and negative 19.3 per cent for H2 to date and the year-to-date compares to the S&P/TSX Composite and the S&P/TSX Utilities sector returns of negative 2.3 per cent, negative 12.4 per cent and negative 9.4 per cent and negative 9.8 per cent for the same periods, respectively,” he said. “On a relative basis, AQN underperformed the Canadian peer group by 805 bps and 1319 bps over H2 to now and for YTD. With AQN’s business, we consider the performance versus the S&P 500 Utilities sector and in USD terms, the stock delivered negative 22.2 per cent and negative 25.8 per cent on the H2 to date and YTD versus the benchmark’s negative 11.4 per cent and negative 10.1 per cent, respectively. Given a consistent sector valuation methodology, we don’t see the need to compress the multiples for the utilities business or AQN’s renewables segment on a standalone basis.”
The analyst said he now sees “plenty of positives,” noting: “Recently, AQN benefitted from two events: (a) a downward price revision for the Kentucky deal); and, (b) the firm’s first major capital recycling announcement with the potential for more to follow. On the horizon, benefits from the Inflation Reduction Act and the investor day (usually December) could provide positive incremental news flow.”
Mr. Kuske’s US$15 target falls short of the Street average of US$16.33.