After a tough couple of years, the AGL Energy Limited (ASX: AGL) share price has returned to form in 2022.
Since the start of the year, the energy company's shares have risen almost 12%.
As a comparison, the ASX 200 index is down 10% year to date. That's a relative outperformance of 22%.
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Can the AGL share price keep rising?
The good news is that you're not too late to the party, according to analysts at Morgans.
A recent note reveals that the broker has retained its add rating with an $8.63 price target.
Based on the current AGL share price of $7.04, this implies potential upside of over 22% for investors over the next 12 months.
In addition, the broker is forecasting a 30 cents per share dividend in FY 2023, which equates to an attractive 4.2% dividend yield.
What did the broker say?
Morgans is feeling positive about AGL's outlook after a tough period. It explained:
Legacy coal contracts in NSW and the owned Loy Yang mine in VIC provide low cost fuel to limit the increases in the average cost of energy and should therefore boost margins in a very tight electricity market.
Delays in the expected timing of Snowy Hydro, a potentially protracted conflict in Ukraine and general underinvestment in generation across the sector point to higher domestic energy prices on average in the medium term which will in turn support higher earnings for AGL.
The broker also highlights that demerger uncertainty has now been resolved and things are looking brighter for its ESG credentials. Morgans also reminds investors that there has been takeover interest and appears to believe that it could resurface. It said:
Uncertainty about the demerger has been resolved and activist shareholders may actually improve the market's perception of AGL's ESG impact if it can chart a credible path to replacing its coal generation assets over the next decade. AGL has also attracted interest as a takeover target.
