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Citi downgrades Drax to 'neutral' from 'buy'
(Sharecast News) - Citi downgraded Drax on Thursday to 'neutral' from 'buy' as it said the shares were already discounting much of the probability-weighted upside, but lifted the price target to 923p from 850p. The bank noted that Drax has been a standout performer in an arguably fully-valued sector, with the shares up about 25% over the past three months.
"Our previous upgrade was underpinned by the optionality value around potential AI/DC development embedded in Drax's 'old-world' assets, which we captured through a probability-weighted approach," it said. "We now see the shares fairly pricing in that optionality and see a growing expectation of delivery from Drax to support current valuation."
In the meantime, Citi said Drax has shifted focus towards FlexGen, which the bank thinks can benefit from structural changes in the UK energy system.
"Pellets remain more uncertain long-term, however strong medium-term offtake visibility should alleviate investor concerns in that division for now," Citi said.
At 1310 GMT, the shares were down 1.8% at 854p.
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