AGL Energy Limited (ASX: AGL) shares struggled through September, tumbling 11% despite the company outlining some major future changes.
Sentiment on such changes has the potential to continue driving the stock in October and beyond. Particularly, as experts line up to herald the benefits and challenges the company could face on its crusade to dump coal.
The AGL share price is currently trading at $6.86.
Let's take a look at what the S&P/ASX 200 Index (ASX: XJO) energy producer and retailer's future could hold.
What could October hold for AGL shares?
AGL shares have been the talk of the town since the ASX 200 company revealed its $20 billion plan to exit coal-fired generation by financial year 2035, turning to new renewable and firming technology instead, on Thursday.
And the company's spotlight has extended into October as the market digests the transformational goal. So far, experts have put forward both positive and negative takes.
Morgans dubbed AGL's newly announced strategy "sound", my Fool colleague James reports. The broker continued:
AGL has set itself an achievable timeframe to make the transition and, in our view, correctly identified that storage and firming assets will be the key investments needed to retain some form of competitive edge as the grid decarbonises.
Morgans slapped AGL shares with an outperform rating and an $8.20 price target – representing a potential 19.5% upside.
The broker isn't alone in its bullishness. UBS analyst Tom Allen said, courtesy of The Australian, the company's plan to invest in batteries "should unlock value".
What about the challenges?
Not all experts were optimistic. Regal Funds Management analyst James Hood was quoted by Reuters as saying:
[F]or AGL you are effectively closing your cash generating assets early to fund lower [return on invested capital] assets with a questionable funding pathway to do so.
On that note, Macquarie analysts are hopeful AGL's balance sheet will remain intact amid the planned spend, according to The Australian.
UBS also reportedly noted the company has around $2 billion of balance sheet capacity before it risks its Baa2 credit rating – which would make borrowing more expensive.
The company is expected to develop renewable energy generation projects off its own balance sheet, the Australian Financial Review reports. It could, perhaps, use its 20% stake in formerly ASX-listed Tilt Renewables to do so.
Meanwhile, its planned firming assets would ideally be developed on AGL's balance sheet.
All in all, there are plenty of details yet to be ironed out by AGL, and expectations of such have the potential to shift sentiment in the company's shares this month. However, most experts appear optimistic about the company's longer-term future.
