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Understanding Duke Energy’s Price Target

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Nov. 20 2020, Updated 4:26 p.m. ET

Price targets

According to Wall Street analysts’ estimates, Duke Energy (DUK) has a one-year price target of $80.4. This implies an estimated upside of nearly 3.5% from its current market price of $77.75.

Of the total 20 analysts tracking Duke, one recommends it as a “strong buy,” while two recommend it as a “buy.” At the same time, 14 analysts are recommending DUK as a “hold.” A “sell” has been recommended by two analysts, while a “strong sell” has been recommended by one analyst as of January 6, 2016.

By comparison, Dominion Resources (D) has an estimated gain of 3.2% through the next year. According to analysts’ estimates, it has a median price of $78.6, as compared to its current market price of $76.2.

Southern Company (SO) has a one-year median price target of $50.9. This implies an upside of 4% in the next year, as compared to its current market price of $48.8.

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Outlook

According to the EIA (US Energy Information Administration), a colder-than-normal winter is expected in the US from December 2016 to March 2017. Colder temperatures could raise US electricity consumption by nearly 4%. Remember, higher demand could also boost power prices, which is likely to help utilities.

After the Federal Reserve’s 0.25% interest rate hike in December 2016, however, US interest rates are expected to rise again in 2017, and so what really matters for utilities (XLU) and investors is the pace of the rate increases. A near-term interest rate hike could force investors to switch to Treasuries, leading to a slump in utility stocks.

Utilities are currently trading at a ~100-basis-point premium to Treasuries.

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