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NextEra Energy (NYSE:NEE) +3.7% in Wednesday's trading and up nearly 10% in the past two days, as the stock attempts to rebound from a 25% plunge after NextEra Energy Partners (NEP) slashed its growth guidance two weeks ago.
After meetings last week with NextEra (NEE) management, Morgan Stanley reiterated its Overweight rating and $91 price target, noting alternative non-dilutive sources of financing to replace NEP asset sales, intact demand for renewables, and the potential for new disclosures to improve transparency and confidence in the financial outlook.
Without asset sales to NextEra Partners (NEP), investors have been concerned with how the company will backfill $1B-$2B in proceeds; Morgan Stanley analysts expect NextEra (NEE) will pursue tax credit transfers and project debt financing, without needing incremental equity, renewable project sales, or non-core asset sales, and said the financing alternatives should not represent an incremental EPS drag on the outlook.
NextEra (NEE) remains confident in its ability to achieve renewables backlog targets through 2026, and is seeing resilient demand despite higher interest rates and cost inflation pushing up renewables costs, Morgan Stanley said.
The stock now trades in-line with the utility average multiple on a P/E basis despite above-average growth, low earnings and regulatory risk, and strong balance sheet, Morgan Stanley said as it reiterated its Overweight rating and $91 price target.