Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

Drax shares offer big upside ahead of results reckons JPMorgan

Published 14/02/2023, 11:16
© Reuters.  Drax shares offer big upside ahead of results reckons JPMorgan
JPM
-
DRX
-
DRXGY
-

Proactive Investors - Drax Group PLC (LON:DRX) was one of the top FTSE 250 risers on Tuesday morning, fueled by positive comments by JP Morgan ahead of its results next week.

The investment bank raised its price target to 900p from 850p, which would give 44% upside from the current share price.

Shares in the Yorkshire coal-cum-biomass burner have receded from late December's three-month highs on a lower commodity outlook, which the analysts said looked “an overreaction, in a context where the market did not price in the value of higher power prices to begin with.”

At the final results next Thursday, 23 February, the analysts expect strong guidance on 2023 earnings, with potential further catalysts in the second quarter of the year from the publication by the government of a new UK biomass strategy and a potential update from the company on US Bioenergy with Carbon Capture and Storage.

EBITDA guidance for 2023 is expected to be "towards the top end" of the current consensus range, with the average City analyst having pencilled in £1.1bn and JPM looking for £1.23bn.

"Lower power prices may present an opportunity for Drax to lock in profits through buying back volumes previously sold forward at higher prices."

The analysts noted that between last July and December, Drax sold power forward for 2023 at circa £370 per megawatt hour (MWh), while current forward contracts are between £140-£160 per MWh.

Drax is a "top pick" for JP Morgan, with an ‘overweight’ rating and the company put on the broker’s "positive catalyst watch" list heading into the results.

Shares in Drax are up 3% at 645.50p in London on Tuesday.

Read more on Proactive Investors UK

Disclaimer

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.