The disastrous long-term performance of the AGL Energy Limited (ASX: AGL) share price continued throughout the first quarter of FY22.
During the 3-month period, shares in the Australian energy company sank by about 29%. This underwhelming stint means shareholders are now down 50% since the beginning of the year.
Interestingly, other ASX-listed electricity providers didn't perform nearly as badly as AGL. For comparison, Ausnet Services Ltd (ASX: AST) and Origin Energy Ltd (ASX: ORG) gained 44% and 5% respectively. Although, the largest utility company listed on the ASX, APA Group (ASX: APA), slipped 2% during the quarter.
Let's take a look at what might have affected the AGL share price in Q1 FY22.
Pressures piling on
To AGL Energy, it might feel as though it is stuck between a rock and a hard place. The combination of discontent towards its recent poor financial results — and the increasing pressure to transition its business to a more climate-friendly one — likely seem paradoxical to the management team.
In its FY21 results, the company's managing director and CEO, Graeme Hunt, highlighted the period as one of the toughest energy markets in its history. This was partly due to incredibly high wholesale electricity prices, the likes of which have not been seen since 2012. Furthermore, the shift from legacy gas suppliers to new contracts resulted in higher wholesale gas supply prices. Likely, these combining factors weighed on the AGL share price during the quarter.
Simultaneously, the company forked out large sums of capital to address its integration of more renewables. This made a dent in AGL's earnings before interest, tax, depreciation, and amortisation (EBITDA). In FY21, EBITDA fell 21% to $1,630 million.
On top of this, the company has been under the scrutiny of the Australian Shareholders Association (ASA). As my colleague Zach covered, ASA and other shareholders voted in favour of AGL setting short and long-term emissions targets in line with the Paris Agreement. However, the outcome is more of an advisable movement, rather than a 'must do' instruction.
Looking ahead for the AGL share price
As most investors would be aware, past performance is not an indication of future performance. It appears one analyst is putting that notion into action. Recently, analysts at Ord Minnet outlined their forecast for the AGL share price.
According to the broker note, the broker has slapped a buy rating on the energy company's shares with a price target of $7.55. For context, at the time of writing shares in AGL are fetching $6.07 apiece. This indicates a potential 24% upside in the eyes of the broker.
