Jefferies has lowered its rating on AES Corp. from “Hold” to “Underperform,” cutting the price target to \$9. This shift follows a sharp 15% rally in the stock, spurred by optimism around a newly proposed tax bill. However, analysts are cautioning that this bump in valuation may be overdone given the long-term risks.
One of the key concerns highlighted was a slowdown in AES’s renewable business outlook starting in 2027 and beyond. While the company remains active in clean energy initiatives, expectations for its long-term growth trajectory are starting to taper off. Jefferies believes the market may be overvaluing AES’s forward potential, especially given the 13x EV/EBITDA valuation — considered rich compared to peers.
Further compounding the downgrade is uncertainty around the company’s credit rating. AES is highly leveraged, with a debt-to-equity ratio approaching 9x, raising concerns about financial flexibility in an environment where interest rates may stay higher for longer.
🌱 Dividend Fundamentals:
🔹 Dividend Yield: 6.01%
🔹 Payout Ratio: 37.9%
🔹 Dividend Growth: 3% in the last year
🔹 Consecutive Annual Increases: 13 years
AES continues to deliver a high-yield dividend and stable payouts, but the latest downgrade serves as a warning that income-focused investors may need to reassess the stock’s risk-reward balance as growth catalysts begin to fade.