On Wednesday, Pampa Energia S.A. (NYSE:PAM) received an upgrade in its stock rating from Citi, moving from Neutral to Buy. The firm also increased the price target for the company's shares to $58.00, up from the previous target of $51.00. This revision comes as Citi updated its model for Pampa Energia in anticipation of the company's second-quarter 2024 results.
The upgrade and new price target reflect recent developments within Pampa Energia, including a 25% price increase for the company's legacy power generation assets. Additionally, adjustments were made to the market value of Pampa Energia's stakes in its distribution and transmission subsidiaries. Some of the value from Rincon de Aranda, which is expected to be de-risked within the year, was also partially included in the valuation.
Citi's analysis suggests that these factors collectively justify the higher target price for Pampa Energia's American Depositary Receipts (ADRs), leading to the upgrade in the stock's rating. The firm highlighted that there remains an upside to their base case scenario with the potential de-risking of Rincon de Aranda.
The financial institution also provided insights into the company's valuation metrics, noting that Pampa Energia is trading at an estimated 2.9 to 2.3 times its 2024-25 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This valuation is a key metric used by analysts to assess the company's profitability and market value relative to its earnings.
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