On Wednesday, Morgan Stanley upgraded Clearway Energy (NYSE:CWENa) Inc. (NYSE:CWEN) stock from Equal-weight to Overweight, significantly raising the price target to $36.00 from the previous $25.00. The new price target suggests a potential one-year total return of 43.4%, which includes a 6.7% forward dividend yield.
The upgrade reflects Morgan Stanley's confidence in Clearway (NYSE:CWEN) Energy's growth prospects beyond its current guidance through 2026. The firm identified multiple avenues for growth in the coming years, including wind repowering, battery storage colocation, increased Resource Adequacy contract pricing, and sponsor dropdowns. These factors are seen as underappreciated in the company's current valuation.
Morgan Stanley anticipates that Clearway Energy could issue post-2026 guidance that might positively influence the stock's performance. The firm expects this guidance to be revealed with the company's third-quarter 2024 results, which could serve as a catalyst for the stock.
The analyst's commentary underscored the potential for Clearway Energy to surpass its current guidance, with the firm's optimism extending to the longer-term growth prospects for the energy company. The mentioned growth pathways are viewed as not yet fully recognized by the market, offering a promising outlook for investors.
In other recent news, Clearway Energy Inc. has been the focus of positive developments. Analysts from Evercore ISI and Roth/MKM have raised their price targets for Clearway Energy, maintaining positive ratings on the stock.
Evercore ISI increased the target to $30 from $25, citing Clearway's strategic investments and financial management, while Roth/MKM raised the target to $30 from $29, following the company's first-quarter Cash Available for Distribution (CAFD) surpassing expectations.
Clearway Energy's recent commitments, including a $65 million investment in Dan's Mountain and Rosamond South, are anticipated to yield a 10% CAFD per share. The company's current and pending offers to invest in Lune Valley + Daggett I Storage and Pine Forest projects are expected to complete the allocation of the remaining $150 million from Thermal proceeds, also at a 10% CAFD yield.
Clearway Energy also posted strong Q1 results, generating $52 million in CAFD, mainly from its renewable energy assets at Alta. The company upheld its 2024 CAFD guidance at $395 million and announced a 1.7% increase in its dividend. Clearway's strategic investments in battery storage projects, particularly in the western United States, are poised to support future growth, with a 320 MW storage capacity expected by mid-2026.
These developments highlight Clearway Energy's strategic financial decisions and investment commitments, positioning the company favorably for future performance. The new price targets reflect analysts' confidence in Clearway Energy's ability to meet its financial objectives and strengthen its balance sheet over the next few years.
InvestingPro Insights
Morgan Stanley's upgrade of Clearway Energy Inc. (NYSE:CWEN) is underpinned by several growth avenues that may not yet be fully reflected in the company's current market valuation. To complement Morgan Stanley's outlook, InvestingPro data and tips provide additional context for investors considering CWEN's stock.
With a market cap of $5.17 billion, CWEN is trading at a high earnings multiple, with a P/E ratio of 36.64, indicating investor confidence in future earnings potential. Despite the high earnings multiple, CWEN pays a significant dividend to shareholders, with a robust dividend yield of 6.23% as of the latest data, which may appeal to income-focused investors. Additionally, CWEN's liquid assets surpass short-term obligations, suggesting a solid financial position for meeting its immediate liabilities.
Investors looking for further insights into CWEN can explore additional InvestingPro Tips, which include the company's trading at a high EBIT and revenue valuation multiple, as well as analysts' predictions of profitability for the year. For those interested in a deeper dive, InvestingPro offers more tips, and by using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
With Morgan Stanley's positive stance and the supportive data from InvestingPro, Clearway Energy's stock presents a case for both growth and income potential, aligning with the analyst firm's expectations for the company's future performance.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.