What’s Next for CenterPoint Energy Stock?

Internal spin of Enable Midstream

CenterPoint Energy (CNP) rose 3.6% after J.P. Morgan upgraded it from neutral to overweight on September 5. J.P. Morgan Chase also raised CenterPoint Energy’s price target from $29.0 to $31.0.

On September 4, CenterPoint Energy announced the completion of the internal spin of its Enable Midstream interests to a newly formed subsidiary, CenterPoint Energy Midstream. The simplified structure is expected to provide better visibility of earnings going forward.

What’s Next for CenterPoint Energy Stock?

CenterPoint Energy is up about 2% this year, while the Utilities Select Sector SPDR ETF (XLU) has risen approximately 4% year-to-date.

Improved prospects

CenterPoint Energy agreed to buy Vectren Corporation (VVC) in May 2018, and the combined entity is expected to have an enterprise value of $27 billion. The ongoing acquisition is expected to close by Q1 2019. Post-merger, CenterPoint Energy’s rate base will likely grow at 7.6% annually through 2022.

Analysts largely seem cautious on CNP. Among the total 13 analysts tracking the company, ten recommend the stock as a “hold,” while one recommends a “strong buy,” and two recommend a “buy.” None of them have a “sell” recommendation on CenterPoint Energy stock as of September 6. Analysts’ median price target of $29.0 indicates flattish movement for the next 12 months. SunTrust Robinson Humphrey cut CNP’s target price from $30.0 to $28.0 on September 4.

Chart indicators

With the recent breakout, CenterPoint Energy (CNP) stock is trading at $28.92, nearly 4% and 6% above its 50-day and 200-day moving averages, respectively. The premium to both these support levels indicates strength in the stock. However, it is currently trading in the overbought zone with its RSI (relative strength index) at 78.

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