Endesa SA: Potential Downside Amidst Normalizing Earnings and Commodity Prices

Citi analyst Jenny Ping downgraded the rating on Endesa SA (0N9G – Research Report) to a Sell yesterday, setting a price target of €20.30.

Jenny Ping’s rating is based on several factors that suggest potential downside for Endesa SA’s stock. The recent rally in Endesa’s shares has been driven by factors such as the announced share buyback program and potential investment opportunities. However, these elements are now fully reflected in the stock’s price, and the risks associated with normalizing earnings have not yet been accounted for, particularly in the context of a potential global recession.
Furthermore, Jenny Ping anticipates downward pressure on Endesa’s integrated EBITDA due to the expected normalization of commodity prices. The current elevated EBITDA levels, which are significantly higher than pre-conflict levels, are seen as unsustainable. While the share buyback program may offer some support, it is not expected to significantly alter the company’s valuation, especially as commodity price movements are likely to have a more substantial impact on earnings and the share price. As a result, the price target remains unchanged at €20.3, with an expected share price return of -17.0%.

According to TipRanks, Ping is a 4-star analyst with an average return of 9.8% and a 62.96% success rate.

In another report released on April 4, Morgan Stanley also maintained a Sell rating on the stock with a €24.00 price target.