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Mizuho downgrades FirstEnergy to 'neutral' on valuation

Mizuho Securities USA LLC on Sept. 20 downgraded FirstEnergy Corp. to "neutral" from "buy" as it raised the company's price target to $48.50 from $46.

Shares of FirstEnergy closed Sept. 19 at $48.11.

"We believe the stock is fairly valued at these levels, pricing in much of the upside associated with successfully exiting the unregulated business, as well as removing any uncertainty related to rate case activity after settling in Ohio and New Jersey," Mizuho analyst Paul Fremont wrote in a research report.

In May 2018, Mizuho upgraded FirstEnergy to "buy" from "neutral" based on valuation and the potential for the company to be acquired as it restructured following the FirstEnergy Solutions Corp. bankruptcy and a $2.5 billion equity infusion from activist investors. The firm added that the company's stock at the time "performed in the bottom quartile relative to the electric utility group," trading at a discount with the potential for upside.

"When we initially upgraded [FirstEnergy], the stock was trading at a 17% discount to the peer group on a P/E basis," Fremont wrote in the Sept. 20 report. "Year to date, FirstEnergy has consistently performed in the top quartile, effectively outperforming the electric utility group by roughly 10%."