Should you Invest in this Global Clean Energy Stock - AES

Feb 15, 2022 12:00 AM PST | Team Kalkine
Should you Invest in this Global Clean Energy Stock - AES


The AES Corporation

AES Details

The AES Corporation (NYSE: AES) operates as a diversified electricity generation and distribution business portfolio through its subsidiaries and affiliates.

Result Performance for the Quarter Ended 30 September 2021 – Q3FY21

  • The revenue stood at $3,036 million in Q3FY21 from $2,545 million in Q3FY20, primarily driven by rising in US and Utilities SBU revenue to $1,327 million in Q3FY21, followed by rising in MCAC SBU to $559 million, among others.
  • The company has delivered diluted EPS from continuing operations of $0.48 in Q3FY21, increasing $0.98 YoY. This was driven by higher impairments and losses on the sale of businesses in 2020 and higher contributions from renewables growth and the Southland portfolio in the United States.
  • The adjusted EPS stood at $0.50 in Q3FY21, up by $0.08 YoY, driven by higher contributions from renewables growth, the Southland portfolio in the United States, and lower parent company interest expense.

Source: Company Reports, Analysis by Kalkine Group

Recent Update

  • On 9 February 2022, Fluence (Nasdaq: FLNC) announced an agreement with The AES Corporation to employ Fluence IQ Bidding Application to expand the value of a 1.1 GW portfolio of solar and energy storage projects in the Western United States.
  • On 25 January 2022, the company would host a conference call on 25 February 2022 at 10:00 AM to review its Q4FY21 and FY21 financial results.


Considering the year-to-date 2021 progress, the company has raised the full year 2021 target to sign renewables under long-term PPAs to 5 GW, from 4 GW. Further, the company has reaffirmed its 2021 adjusted EPS guidance range of $1.50-$1.58. However, it is forecasted to remain at the low end of the range owing to the impact of a non-cash adjustment of $0.07 per share related to equity units issued in March 2021. Additionally, it has reaffirmed its annualized growth target of 7-9% through 2025 from the base year of 2020. Moreover, the company plans to capitalize on its leadership position in the transformation of the electricity sector.  The current backlog is at the historical level at 9.2 GW, with 60% in the United States.

Key Risks

The company is exposed to the risks of changes in its generation facilities or distribution systems' availability due to the rise in scheduled and unscheduled plant outages, equipment failure, failure of transmission systems, etc. Further, it is prone to the risks of economic, social, and political instability in any country or region, as well as adverse changes in currency exchange rates.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Daily Price Chart

Source: REFINITIV, Note: Purple color line reflects Relative Strength Index (14-Period)

Stock Recommendation

The company has delivered a 6-month and one-year return of ~-11.90% and ~-24.78%, respectively. The stock is trading lower than the average price of the 52-week low-high range at $21.51-$29.07.

The stock has been valued using an EV/Sales multiple based relative valuation (on an illustrative basis), and the target price so arrived reflects a rise of low double-digit (in % terms). In addition, a slight premium has been applied to peer average EV/Sales multiple (NTM basis), considering its healthy performance in Q3FY21, reaffirming 2021 Adjusted EPS guidance, and a record backlog.

Considering the factors above, we give a “Buy” recommendation on the stock at the current market price of $21.56 per share as of 14th February 2022 (Time: 10:14 AM, NY, USA).

The AES Corporation (AES) is a part of Kalkine’s Global Fully Charged Product

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in 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 where-in 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: It is a level to protect further losses in case of unfavourable movement in the stock prices.