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Guggenheim upgrades, raises price target for American Electric Power

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


Guggenheim upgrades, raises price target for American Electric Power

Guggenheim Securities LLC on Sept. 10 raised its investment opinion on American Electric Power Co. Inc. to "buy" from "neutral" and raised its price target to $77 from $64, saying AEP shares "have failed to perform as expected despite the removal of an overhang" — namely, the cancelled Wind Catcher Wind Farm.

"Following the removal of a key binary risk in Wind Catcher, we have yet to see shares re-rate higher despite what seems to be an increasing level of interest from investors for pure regulated utilities without binary risks especially as we head into 2H with many investors we speak to assuming single-digit returns for the broad markets. ... Some utilities have room to run and AEP has yet to catch this bid," Guggenheim analysts said in a note to investors.

In late July, AEP announced it is canceling the $4.5 billion Wind Catcher project after Texas regulators rejected cost recovery for the acquisition and construction of the 2,000-MW facility.

With the cancellation of the project, Guggenheim believes that AEP's increased capital could be "deployed without creating additional pressure on rates." Guggenheim analysts increased their EPS estimates for 2019, 2020 and 2021 to $4.17, $4.36 and $4.61, respectively, from $4.06, $4.27 and $4.49.

Guggenheim considers the following the top regulated utility stocks: Entergy Corp., FirstEnergy Corp., AEP, Sempra Energy, Duke Energy Corp. and OGE Energy Corp.