Southern Company (SO) has continued to trade sideways. The utility stock hit a new 52-week high late last month but has been trading in a very narrow range since September. Southern Company stock is the top gainer among peers this year. It has soared 42% year-to-date, against utility stocks’ average gain of 20%. Peers NextEra Energy (NEE) and Duke Energy (DUK) have risen 35% and just 4%, respectively, this year.
What’s next for SO?
Although it has been rangebound recently, Southern Company stock has continued to look strong based on its simple moving averages. It is currently trading close to $62, marginally above its 50-day moving average. This level, close to $61.80, could act as crucial support for the stock in the short term. At the same time, it is trading at a 9% premium to its 200-day moving average. This level, of around $57, might also act as support in the short-to-medium term.
Southern Company stock seems neutral at the moment, with a relative strength index score of 43. SO has rallied more than 46% from its 52-week low of $42.50 last December, and it has fallen almost 2% from its 52-week high of $63.30 on November 25.
Southern Company’s valuation
Southern Company stock looks to be trading at a premium to its historical average. It is trading at 20 times analysts’ earnings estimate for the next year. Its five-year historical average is near 19x. Utility stocks, on average, are trading at 19 times their forward earnings estimates. Southern Company stock has had an unusual rally this year, reaching an all-time high.
NextEra Energy stock also looks expensive at the moment. It is trading at 26 times its forward earnings estimate. Its five-year average valuation is 21x. Meanwhile, Duke Energy stock has significantly underperformed peers this year. It is trading 17.5 times its forward earnings estimate, which looks reasonable compared with its historical average. DUK looks inexpensive against top utility stocks. To learn more, Utility Stocks: Is There Any Steam Left in These Defensives?
Despite its premium valuation, Southern Company stock could be on investors’ radar for its dividends. Its yield is currently 4%, higher than peers’. It also has a long dividend payment history. Southern Company has increased dividends for the last 18 years. The utility is largely involved in regulated operations, which stabilizes its earnings and dividends. For more about its dividends, read Southern Company’s Dividends Compared to Its Peers.
Southern Company: Analysts’ views
Analysts’ mean target price of $61.40 for Southern Company stock implies a 1% downside. Of the 18 analysts covering SO, 12 recommend “hold,” one recommends “buy,” four recommend “sell,” and one recommends “strong sell.”
Analysts’ mean 12-month target price of $96.20 for Duke Energy stock implies a 7% upside against its current market price of $89.80. Evercore ISI cut its target price from $95 to $92 last week. NextEra Energy stock could offer an upside of just 3% based on analysts’ mean target price of $241.50. It is currently trading at $234.40.