Leading broker names AGL Energy and Origin Energy shares as buys

The AGL Energy Limited (ASX:AGL) share price and the Origin Energy Ltd (ASX:ORG) share price are in the buy zone according to one leading broker…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The AGL Energy Limited (ASX: AGL) share price and the Origin Energy Ltd (ASX: ORG) share price could be on the rise on Thursday after being the subject of a positive broker note out of Goldman Sachs.

According to the note, the broker believes share price weakness over the last 12 months has left both energy companies trading at attractive levels.

Goldman has a buy rating and $24.40 price target on AGL Energy's shares and a conviction buy rating and $9.90 price target on Origin Energy's shares.

For AGL Energy's shares this implies potential upside of over 13% and for Origin Energy the potential upside implied with Goldman's price target is a sizeable 37%.

Why does Goldman Sachs think now is the time to buy?

As well as their share price underperformance, Goldman believes that concerns over the Federal election and the impact it could have on wholesale electricity prices has been overdone.

In fact, the broker believes that wholesale electricity prices will stay higher for longer. This is expected to be driven by an under-supply in firming generation.

Goldman also expects regulatory uncertainty to ease in the near term and support their shares.

It said: "Regulatory certainty emerging over the next 12 months, driven by three key factors including, consumer bill price relief from lower infrastructure charges 2020/21, finalisation of National Energy Policy post the May 2019 Federal election, and finalisation of the Default Market Offer or retail electricity price regulation, which we expect to favour the gentailers' market position, lowering churn."

Should you invest?

If Goldman is correct with wholesale electricity prices remaining higher for longer then I think both AGL Energy and Origin Energy could outperform over the next 12 months.

However, I'm going to sit this one out for the time being and wait to see what happens in the upcoming election before making a move.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »

Father in the ocean with his daughters, symbolising passive income.
Dividend Investing

I'd spend $8k on these ASX 200 shares today to target a $6,102 annual passive income

I believe these ASX 200 shares will continue rewarding passive income investors for years to come.

Read more »

Three businesspeople leap high with the CBD in the background.
Share Market News

Boom! ASX 200 blasts to new record highs

ASX 200 investors just sent the benchmark index into uncharted territory.

Read more »