AGL Energy Ltd (ASX: AGL) is an ASX 200 utilities stock that has had a rough YTD.
Since the start of 2025, its share price has fallen almost 16%.
However, broker Macquarie sees upside in the battered ASX 200 share.
Lets see what's behind the brokers optimism.
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Tough end to the year
According to a new report from Macquarie, AGL faced some challenges in the last two months of the year.
Its coal power stations didn't perform as well and missed out on times when electricity prices spiked. As a result, AGL produced about 2.1 terawatt-hours less energy compared to the same time last year, costing them up to $153 million.
This impact was partly softened by power from a new wind farm (Rye Park), more use of gas plants, and financial hedging.
Also, unlike last year when low wind in South Australia and Victoria pushed prices up (which helped AGL), wind conditions returned to normal this year, which reduced pricing advantage.
Estimates for FY25E -11.2% to reflect lower coal generation; FY26E -1.3% with marginally lower generation; FY27E -6.3% reflecting reduced LGC pricing. MRE is -13.8%/-5.6%/-5.6% below Visible Alpha consensus.
Bounce back coming for this ASX 200 stock
Despite this, the broker remains the utilities share can bounce back.
FY25 suffered a tough May and June, but fundamentals remain strong with investment in batteries to replace losses in gas and LGC pricing. PE is at the lower end of the historical trading range, yet management strategy and delivery is improving.
For the 2026 financial year, Macquarie expects AGL to recover about 1.3 terawatt-hours of energy generation and start seeing benefits from its new battery project. However, there's a risk of delays due to a slower approval process by the energy market operator.
Battery trading (buying low, selling high) is expected to stay profitable – earning around $40 million in FY25 – especially in NSW and Queensland. Also, the recent drop in battery costs is a good sign for future investment decisions in AGL's firm power projects.
Based on the report from Macquarie, the broker has an "outperform" rating and price target of $11.13.
This indicates an upside of 16.31%.
Other brokers are also optimistic about AGL shares.
Trading View has a 12 month price target of $12.05, which indicates more than 25% upside.
Online brokerage platform Selfwealth has an average price target of $11.96.
