On Friday, Argus made adjustments to its outlook on AES Corp (NYSE:AES), a global power company, by reducing its price target to $28 from the previous $31, while continuing to endorse the shares with a Buy rating.
The firm highlighted AES's role as a diversified independent power producer with a strong presence in new energy technologies, including green hydrogen. The company is recognized for its leadership in the transition to sustainable power generation.
AES Corp is known for being the top global seller of renewable energy to corporate customers and U.S. data centers, a market expected to expand by 30% by 2030. The Inflation Reduction Act's tax credits further support the company's growth. AES anticipates increased renewable energy sales due to new projects coming online in 2024.
Notably, AES has secured a significant long-term solar contract with Amazon (NASDAQ:AMZN), marking the largest solar-plus-storage project in the United States. The company also supplies renewable energy to major tech companies such as Google (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT).
The firm’s contracts, including those with utility customers that support data center operations and rate recoveries in its utility businesses, are seen as drivers for AES's long-term growth strategy. The company aims for an annual growth rate of 7%-9% in adjusted EPS through 2027.
Despite the price target reduction, Argus sees the current valuation of AES, trading at 11 times the firm's 2024 EPS forecast, as favorable when compared to the historical range of 11-16 times.
AES's focus on renewable energy and favorable valuations were key factors for maintaining the Buy rating despite the new lower price target.
InvestingPro Insights
As AES Corp (NYSE:AES) continues to navigate the evolving landscape of renewable energy, recent data from InvestingPro underscores some of the financial nuances that investors should consider. With a Market Cap of approximately $15.47 billion and a notable P/E Ratio of 28.03, the company's valuation demands attention. Although revenue has seen a slight decline of 3.77% over the last twelve months as of Q1 2024, the company has maintained a Gross Profit Margin of 20.21%, reflecting its ability to manage costs effectively.
One of the notable InvestingPro Tips is that AES has consistently raised its dividend for 12 consecutive years, which may appeal to income-focused investors, especially with a current Dividend Yield of 3.17%. Additionally, analysts have revised their earnings upwards for the upcoming period, signaling optimism about the company's financial prospects. Moreover, AES has demonstrated strong returns over various periods, with a 44.62% return over the last three months and a 29.04% return over the last six months. For investors interested in delving deeper into AES's financial health and future outlook, there are 13 additional InvestingPro Tips available, which can be explored further with a subscription.
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