Shares in AGL Energy Limited (ASX: AGL) are heading south today and are now trading 6% lower at $6.82 apiece.
Whilst there's been no price-sensitive news out of the energy giant's camp today, AGL did release its first-half results for FY22 yesterday.
Market pundits originally responded well to the update, which was characterised by a 6% year on year gain in revenue. There was also a jump back into the black with statutory net profit after tax (NPAT) at $555 million.
However, the activity was short-lived yesterday as investors started to pick apart the update. Underlying NPAT decreased by 41% and the interim dividend was cut to 16 cents per share compared to 41 cents last year.
Is AGL a buying opportunity after its results?
Morgan Stanley analysts remain neutral on the stock. However, they do reckon AGL is set to deliver a strong set of results in FY23. But for now, they think it might be best for investors to sit on the sidelines.
Morgan Stanley says AGL should benefit from a recovery in energy demand after the La Nina summer in Australia and COVID-19 lockdowns.
The investment bank also notes that energy prices in the eastern states of Australia are another potential tailwind for AGL shares, especially given the current state of energy markets around the world.
However, the broker also cautions investors on the prospect of supply increases. New plants and company ventures may even out the demand/supply equation and reduce prices.
AGL's redundancy program is sure to help its operating costs in FY22/FY23, the broker says, alluding to the energy giant's decision to slash its coal and gas power plant workforce last year.
Even though Morgan Stanley remains neutral on AGL shares, the broker did lift its price target by 6% to $6.88. This means they feel AGL is fairly valued right now (supporting its neutral view).
What do other brokers say?
Fellow broker JP Morgan is more constructive on AGL and rates the shares a buy on an $8.75 price valuation.
The team likes AGL's current valuation, its corporate appeal, and current strength in underlying commodity markets. As such, the broker urges its clients to buy AGL.
Credit Suisse is equally bullish on AGL and has set a price target of $8.20 per share.
AGL share price snapshot
In the past 12 months, AGL has tanked almost 40% after a difficult period in 2021. However, this year to date, the AGL share price has climbed by 8%.
