Why has the AGL (ASX:AGL) share price climbed 14% in a month?

AGL is now a winner over the past month. What;s changed?

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A businessman points to and arrow going up on a graph, indicating a share price rise for an ASX company

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Until recently, the AGL Energy Limited (ASX: AGL) share price had something of a reputation as a wealth destroyer. After all, this is a company that remains down 49.88% year to date in 2021 so far. As well as down 55% over the past 12 months, and 98.3% over the past 5 years. It’s also down a shocking 78% from its last all-time high, which we saw back in 2017.

Sparking a comeback?

But could this embattled energy company be experiencing a recovery of sorts? Since bottoming out at a decades-low of $5.22 back in mid-September, the AGL share price has staged a rather dramatic comeback of sorts.

At today’s share price of $6.10 (at the time of writing), AGL is now up an impressive 16.48% from that low. AGL shares are also up a healthy 13.98% over just the past month. That’s including the 1.4% the shares have added just today so far.

So AGL shares have suffered so heavily in recent years due to a number of factors. Firstly, a deteriorating financial position hasn’t helped. AGL has spent the past year or three repeatedly downgrading earnings guidance, and delivering falling profits. For example, the company reported a revenue slide of 10% in its FY2021 earnings report back in August. That was along with a 33.5% drop in underlying profits and a 23.5% cut to its full-year dividend.

Then, we have AGL’s plans to split its business in two, which was announced in June. It plans to complete this split by the fourth quarter of FY2022. This will see AGL’s generation assets be housed in the new ‘Accel Energy’. While its retailing division, responsible for energy trading, storage and supply, will be housed under ‘AGL Australia’.

But investors haven’t taken too kindly to these plans, going off the share price reaction to this news earlier in the year.

So that’s what’s partially gone wrong with AGL. So what’s turned the sentiment ship around over the past month or so?

Could AGL shares be a buy right now?

Well, it’s not entirely clear. There have been no major news or developments out of AGL that might have had a material impact on investor sentiment in recent weeks.

It’s possible that investors just saw a company that has been severely beaten down, and have subsequently been buying on value alone.

A recent broker note could supplement this view. As my Fool colleague James covered last week, broker Ord Minnett has rated AGL as a ‘buy‘, with a 12-month share price target of $7.56. That still implies a potential upside of close to 24% in current pricing. Ord Minnett is eyeing off the upcoming demerger as a value opportunity. It reckons that “the retail business… would have a lot of appeal as a takeover target post-demerger”.

At AGL’s current share price of $6.10, the company has a market capitalisation of $4.02 billion and a dividend yield of 10.64%.

Should you invest $1,000 in AGL right now?

Before you consider AGL, you'll want to hear this.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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