Key insights
- Goldman Sachs upgraded EDP Renovaveis to Buy, citing a strong U.S. renewables outlook where it expects high industry returns for 3-5 years. The firm anticipates significant profit growth and sees upside from AI-driven data center demand. This positive analyst view on a key player in the U.S. renewable sector suggests potential tailwinds for related equities and infrastructure investments.
Investing.com - Goldman Sachs upgraded EDP Renovaveis SA (EDPR:LI) (OTC:EDRVF) to Buy from Neutral and raised its price target to EUR17.50 from EUR15.00. The stock currently trades at $15.92 with a market capitalization of $16.7 billion, though InvestingPro analysis suggests the company appears overvalued at current levels based on its Fair Value assessment.
Analyst Alberto Gandolfi cited three reasons for the upgrade, including the company’s U.S. renewable activities accounting for approximately 65% of the business. Goldman Sachs believes the market underestimates the outlook on industry returns, with project IRRs at approximately 10-11% based on the firm’s estimates and recent estimates by main U.S. developers.
The firm expects these returns could remain the highest in U.S. renewable energy sector history for another three to five years. Goldman Sachs sees major upside versus Visible Alpha Consensus estimates.
The firm’s expectations for rising returns and an acceleration in organic capital expenditures later in the decade suggest a boost in net profit by approximately 90% over 2028-2031 to approximately EUR1.0-1.1 billion depending on asset rotation gains. The company maintains impressive gross profit margins of nearly 80% and has delivered a strong 40% return over the past year. Goldman Sachs’ net profit estimate is approximately 20% ahead of Visible Alpha consensus in 2031.
Gandolfi noted that EDP Renovaveis is highly geared to adoption rates in artificial intelligence, with data center deals in the U.S. or Iberia providing scope for valuation upside.
In other recent news, EDP Renewables reported a first-quarter fiscal 2026 recurring net profit of €71 million, surpassing analyst estimates by approximately 25%. This performance was attributed to lower depreciation and amortization expenses and reduced financial costs. The company’s EBITDA reached €489 million, aligning with consensus expectations. A notable factor in this financial outcome was a decrease in the average cost of debt to 4.5% from 4.8% the previous year. North America contributed significantly to the results, with a 12% year-over-year increase in EBITDA, driven by new production and investment tax credits. However, this was partially offset by a 14% decline in European EBITDA due to lower energy prices.
In another development, EDP Renovaveis announced a transaction to transfer its Brazilian operations to its parent company, EDP Brasil. The equity consideration for this transfer is approximately R$4.1 billion (€0.7 billion), with an enterprise value of around €1.5 billion. The transaction is expected to close by the end of 2026.
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