New York, July 25 (FinanceEnquiry.com) – Analyst Keith Stanley at Deutsche Bank Securities downgrades his rating on the shares of NRG Energy (NYSE: NRG) from BUY to HOLD. The 12-month target price has been raised from $19 to $20.
In a research note published on July 24, the analyst mentions that on a combination of rising prices of gas, excitement over summer optionality in ERCOT and the benefits of the acquisition of GenOn Energy, Inc (NYSE: GEN), stock of NRG Energy now rallied significantly from the April low and due to this, rating has been downgraded. In addition to this, while diluting upside optionality of NRG in the ERCOT market, GEN deal is seen as value neutral to important financial metrics on a recurring basis. Standalone 2014 financial projections of NRG Energy and GEN are pretty much boosting, merger synergies are viewed as achievable.
It means, no material upside in NRG stock and move to the sidelines are seen following latest strength and due to uncertainty in the gas and power markets. Furthermore, with upside optionality from its concentrated exposure to the attractive Texas market, core thesis on stock of NRG has laid its attention on its considerable generation of FCF even at relatively low long-term prices of gas.
As gas market fears have decreased, reforms of ERCOT market have moved forward and now on the back of cost savings from consolidation with GEN, stock of NRG Energy rose 36 percent since the April low. With further material upside over the near term that is likely to be dependent on a second leg in the gas rally or summer heat in Texas, NRG remains as a highly leveraged generator of power after merger.
By applying the baseline 8.0x EV/EBITDA multiple to 2014E open EBITDA on a standalone basis, NRG Energy is valued. Using a DCF analysis, solar is also valued. Given GEN deal is approximately neutral to long-term value, for valuing NRG on a standalone, comfortable approach has been carried. Furthermore, on the back of updated outlook of NRG, target price has been raised by $1 on a modest increase to the estimates of 2013 or 2014.
Higher gas prices and greater merger synergies are considered as upside risks, while weaker gas prices and an inability to monetize solar tax attributes are considered as downside risks. Historical estimated P/E analysis for the years 2012 and 2013 are 16.4 x and 45.4 x, while for 2011, actual P/E analysis was 12.5 x the analyst adds further.
New York, May 24 (FinanceEnquiry.com) – In view of the fact that tremendous instability in the Nikkei kept investors on edge, the yen bounced back largely and Asian stocks dropped to one-month lows on May...
New York, May 24 (FinanceEnquiry.com) – Marvelous is perhaps the only word to describe majesty of upcoming Sony Xperia ZR that is supposed to enter the market in the current quarter. This Micro-SIM...
New York, May 23 (FinanceEnquiry.com) – Talk T-Mobile myTouch 2 came in the market last year in August and since then it has continuously been ‘talk of the town’ as a consequence of incorporating...
New York, May 22 (FinanceEnquiry.com) – Jobless rate of Columbiana County fell another time in the earlier month even though stays higher than the statewide average.
Furthermore, if to believe...
New York, May 22 (FinanceEnquiry.com) – It has been more than six months that Spice Mi-500 Stellar Horizon was released. This dual SIM (Mini-SIM, dual stand-by) handset attracted a lot of...
New York, May 21 (FinanceEnquiry.com) – In accordance with official Government statistics, home costs soared 0.4pc in March. Detailing it, as mentioned by the Office of National Statistics (ONS), increasing from...
New York, May 21 (FinanceEnquiry.com) – Proclamation regarding the release of ZTE Grand X2 In has recently been made in May only and the gadget is supposed to hit the industry in third quarter of the...
New York, May 20 (FinanceEnquiry.com) – At the same time as Asian shares soared in response to US equities rallying on positive economic statistics, the yen inched up on the very first day of the week as soon as...
New York, May 17 (FinanceEnquiry.com) – The number of Americans looking for jobless benefits soared by 32,000 previous week to a cyclically adjusted 360,000, being the maximum since late March. The jump...
New York, May 16 (FinanceEnquiry.com) – With symbols of economic fragility in the US and Europe that pressure fuel demand, West Texas Intermediate (WTI) crude slipped for the fifth time in six days.
In...
