FirstEnergy: Price target
Hybrid utility FirstEnergy (FE) is one of the underperformers of the S&P 500 Utilities. The stock has lost nearly 14% in the last year. In comparison, the Utilities Select Sector SPDR ETF (XLU) managed to gain 5%, while broader markets (SPX-INDEX) rose 17%.
Wall Street analysts expect FirstEnergy (FE) to rise 11.7% in the next year. According to analysts’ estimates, it has an estimated price target of $34.72, compared with its current price of $31.33.
As of March 17, 2017, among the 20 analysts tracking FirstEnergy, 12 recommended it as a “hold,” four recommended it as a “buy,” and two recommended it as a “strong buy.” Two analysts recommend it as a “strong sell.”
FirstEnergy’s growth prospects
FirstEnergy, valued at $14 billion, generates a large chunk of its total earnings from competitive operations. Weak wholesale power prices and energy efficiency programs have severely dented competitive players’ (FE)(PEG)(EXC) business in the last few years. In order to stabilize earnings, FirstEnergy has increased its focus on regulated operations and is transitioning towards becoming a pure-play regulated utility. This strategy bodes well for its long-term growth and stability.
FirstEnergy’s stock has been volatile lately, which could lead to capital erosion for investors. The revival of power prices could be of paramount importance for hybrid utilities going forward. Competitive utilities have been under severe pressure due to lower power prices, so a price recovery could change the outlook for these utilities significantly. For more on FirstEnergy, read FirstEnergy’s 4Q16 Earnings Fell: What’s in Store for 2017?