The AES Corporation (NYSE: AES)

The AES Corporation (NYSE: AES) is the power generation and utility company. It operates through 4 segments: Renewables, Utilities, Energy Infrastructure, and New Energy Technologies.

Recommendation Rationale – Sell at USD 18.54

• In the second quarter of 2024, AES posted net loss of $39 Mn, an increase of $20 Mn as compared to second quarter of 2023.  This increase was because of losses at commencement of sales-type leases at the Renewables Strategic Business Unit (SBU), partially offset by the favorable contributions at the Utilities and Energy Infrastructure SBUs as well as increased contributions from renewables projects placed in service in the current year.
• The company’s businesses might incur substantial costs and liabilities as well as be exposed to price volatility due to risks associated with the wholesale electricity markets.
• Also, wholesale power prices might witness significant volatility in the company’s markets which could impact its operations and opportunities for future growth.
• The company’s share price is trading near to its R1 level recommended on September 4, 2024. Therefore, there can be a possible decline from the specified resistance levels.

AES’ Daily Price Chart

AES Daily Technical Chart, Data Source: REFINITIV

Fundamental Valuation

AES is exposed to the risks related adverse economic developments in China, higher competition, etc.

Therefore, AES is expected to trade at slight discount considering the risks associated. For conducting the valuation, the following peers have been considered: NRG Energy Inc. (NRG.N), ENGIE Energia Chile SA, etc.

Given its current trading levels, and risks associated, it is prudent to book profit at the current levels.

Hence, a ‘Sell’ rating has been provided on the stock at the closing market price of USD 18.54 per share, up by 2.32% as on 13 September 2024.

The AES Corporation (NYSE: AES) forms part of Kalkine’s Global Big Money Portfolio.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 13 September 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.