S&P/ASX 200 Index (ASX: XJO) share AGL Energy Ltd (ASX: AGL) got walloped earlier this week.
The heavy selling action followed the release of AGL's full year FY 2025 results on Wednesday.
By the time the smoke cleared and the closing bell sounded, shares in the ASX energy provider were down 13.1% on the day, closing at $8.88 a shares.
Thursday saw some bargain hunting going on, with AGL shares closing up 1.9% at $9.05.
Still, that leaves the ASX 200 share down 12.9% since Tuesday's closing price of $10.22.
It's also now sees the AGL share price down 18.2% over 12 months. Though those losses will have been somewhat alleviated by the 58 cents a share in partly franked dividends the energy company paid out over the full year.
After analysing AGL's FY 2025, the analysts at Macquarie Group Ltd (ASX: MQG) concluded that investors look to have overreacted by selling down the stock.
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Why did AGL shares come under pressure this week?
Investors were bidding down AGL shares on Wednesday after the ASX 200 share reported a 9% year-on-year decline in underlying earnings before interest, taxes, depreciation and amortisation (EBITDA) to $2.01 billion.
And underlying net profit after tax (NPAT) of $640 million was down 21% from FY 2024.
While on a statutory level AGL recorded a $98 million loss after tax, including significant items.
Management declared a fully franked 25 cents per share final dividend, down 18.6% from last year's final dividend. If you'd like to bank that passive income payout you'll need to own the ASX 200 share at market close on 25 August. AGL trades ex-dividend on 26 August.
With a total FY 2025 dividend payout of 48 cents per share, AGL trades on a fully franked dividend yield (partly pending, partly trailing) of 5.3%.
Now, here's why Macquarie is forecasting a big rebound for the sold off stock.
Why does Macquarie expect the ASX 200 share to rebound?
In a research report on AGL, released on Thursday, Macquarie noted:
FY25 NPAT was in upper half of guidance albeit EBITDA was just below mid-point, reflective of the generation challenges in the last quarter. FY26 EBITDA guidance of $1.92-2.22bn is +2-3% on pcp, and NPAT of $500-700m is -5% on pcp, with the latter impacted by a drag of depreciation and interest.
Macquarie sounded an optimistic note on the roughly $900 million the ASX 200 share has deployed toward battery developments and strategic investments.
According to the broker:
Battery investment will be the driver to replace the EBITDA gap caused by the end of the gas and coal supply contracts (~$700m). AGL is comfortable the 1.5GW of projects will cover gas, and we expect the $1.2-1.4bn of FID projects should cover the residual.
Macquarie added that the upside for investors will come from "better electricity prices, traditionally in base, but now caps with batteries, a return to normalised generation, a restoration of retail gross margins, step change in the cost base from Kaluza".
Connecting the dots, the broker maintained its outperform rating on the ASX 200 share, while lowering its 12-month price target to $10.91. That's more than 20% above Thursday's closing price.
"Management have consistently delivered at mid or upper end of guidance and have a path for cashflow growth," Macquarie concluded.
AGL provided FY 2026 guidance of underlying EBITDA between $1.92 billion and $2.22 billion, and NPAT of $500 million to $700 million.
