The AGL Energy Ltd (ASX: AGL) share price has suffered a 10% decline so far in 2025, as the chart below shows. This is in contrast to the S&P/ASX 200 Index (ASX: XJO) which has risen 2% this year, so there has been significant underperformance. Sometimes, a divergent performance can signify a turnaround opportunity.
AGL is one of the largest energy generators and retailers in Australia. According to the analyst recommendations collated by Commsec, there are currently four buy ratings on the business, three hold ratings and one sell rating.
So, investors are currently more positive than negative on the AGL share price. Let's take a look at what analysts are seeing when they look at the ASX energy share.
Analyst views on the AGL share price
Broker UBS said that its FY25 half-year result was solid, with underlying operating profit (EBITDA) of $1.07 billion beating the market's (consensus) estimates by 8%.
In the HY25 result, AGL highlighted the strong electricity price outlook for FY26 and FY27. However, the FY25 second half could see lower seasonal demand and increasing customer competition. UBS agrees with the prospect of strong electricity prices. The broker is forecasting a retail electricity price increase of around 5%.
UBS also said AGL's expanded battery portfolio was the focus of the results and set out the path for earnings per share (EPS) (consensus) expectations by the market to be upgraded from FY26 onwards. AGL expects to take a final investment decision on 1.4GW of new battery capacity over the next 18 months. This will include four new batteries in NSW and one new battery in Queensland.
Those new batteries should take AGL's total committed battery capacity to around 2.4GW by the first half of FY27. This could see those batteries contribute $95 million of EBITDA in FY26 and $155 million in FY27.
UBS is forecasting the NSW and QLD batteries at deliver an internal rate of return of around 9% after tax. Bigger profits could help increase the AGL share price, since most investors value companies based on how much profit they make.
The broker noted that it has lifted its AGL's forecast capital expenditure (including sustaining capital expenditure to between $600 million to $670 million per year). This is, according to UBS, "amplifying the task AGL faces in optimising generation availability & replacing the energy, capacity & FCF [free cash flow] from its ageing coal-fired generation fleet."
UBS has 'stress-tested' AGL's balance sheet in different scenarios covering higher capital expenditure and lower electricity prices. The broker believes the business will have ample credit metric headroom and this can be maintained under those scenarios.
Price target and dividend
UBS currently has a price target of $11.50 on AGL. This implies a possible rise of 12% from where it is today.
While, the broker is expecting more EPS growth than other analysts, it has a neutral rating on the business because possible large dividend payments could be moderated by the scale of AGL's long-term reinvestment challenge.
UBS predicts that AGL could pay a dividend per share of 51 cents in FY25 and 62 cents per share in FY26. This would translate into forward dividend yields of 5% and 6% in FY26, excluding any franking credits.
Overall, the outlook seems quite positive for owners of AGL shares.
