On Tuesday, JPMorgan (NYSE:JPM) analyst Javier Garrido reaffirmed a positive stance on RWE AG (RWE (LON:0HA0):GR) (OTC: OTC:RWEOY), maintaining an Overweight rating and a price target of EUR 47.50. Garrido highlighted the potential for more than 55% upside to the current price target, expressing confidence ahead of the company’s full-year 2024 results, which are scheduled for release on March 20th. The company, currently valued at $23.65 billion, trades at an attractive P/E ratio of 8.06x, according to InvestingPro data.
The analyst pointed out that RWE’s shares have remained relatively stable since the third-quarter 2024 results, which included announcements of both a capital expenditure reduction and a €1.5 billion share buyback program. Amid political uncertainties, particularly in the United States, Garrido anticipates that RWE will provide an update on capital allocation strategies during the upcoming results presentation, emphasizing a focus on returns and value rather than volume. InvestingPro data shows the company maintains strong liquidity with a current ratio of 1.55x, though it has been quickly burning through cash with negative free cash flow.
Garrido suggested that RWE might announce additional capital expenditure cuts in the range of €3-5 billion, potentially paving the way for future share buyback announcements. Although not factored into the base case at this stage, the analyst noted that an additional €1.5 billion in buybacks could increase earnings per share (EPS) by 5-6% for the fiscal year 2026 net income estimate.
The market is expected to respond positively to such updates, which could lead to a re-rating of the stock. Currently, RWE shares are trading at 12 times JPMorgan’s fiscal year 2026 earnings estimate, whereas the price target suggests a valuation of 19 times earnings. With estimates that surpass the consensus and significant valuation upside, Garrido has placed RWE shares on Positive Catalyst Watch as the full-year results approach. InvestingPro analysis reveals strong analyst support with a consensus "Strong Buy" recommendation, alongside 8 additional key insights available to subscribers through the comprehensive Pro Research Report.
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