The AGL Energy Ltd (ASX: AGL) share price closed in the red on Tuesday afternoon. The ASX energy stock ended the day 0.22% lower at $8.97 a piece. That means that over the month, the shares have now fallen 1.32%. They're down 21.3% since the start of the year.
A lot of the company's share price decline is due to weak earnings for FY25. In August, AGL posted a 9% drop in its underlying EBITDA, a 21% decline in underlying NPAT, and a $98 million loss after tax. Investors were spooked, and it caused a sharp sell-off and a 21% plummet of its share price.
At the time, AGL also set a conservative guidance for FY26. It said it expected underlying EBITDA to be between $1,920 million and $2,220 million, and NPAT of $500 million to $700 million. The company said it expects plant availability and fleet flexibility to improve further, with the Liddell Battery coming online in early 2026 and ongoing investment in new flexible assets and customer growth initiatives.
Why buying the ASX energy stock is a no-brainer
AGL has been making some great growth progress recently. In late October, the company announced plans to buy four new gas turbines for approximately $185 million from Siemens AB. The move is part of AGL's strategy to provide backup capacity for renewable energy.
The Australian Energy Market Operator (AEMO) assigned 176MW of Peak Certified Reserve Capacity to the project, commencing from 1 October 2027.
Shortly later, the company announced the sale of a 19.9% stake in Tilt Renewables for $750 million. It will retain a small residual 0.1% stake. AGL said it will use the proceeds from the divestment to continue to deliver AGL's strategy, "including to fund its investment in flexible, dispatchable capacity and to provide additional balance sheet flexibility".
I think AGL's latest developments mean the shares are now attractively priced and that there are signs of a price recovery ahead. It's a great buying opportunity for investors to get in ahead of a potential uptick.
What do analysts think?
According to TradingView data, 7 out of 11 analysts have a buy or strong buy rating on AGL shares. The average target price on the ASX energy stock is $11.14, and the maximum is $12.24. These target prices represent a potential 24.2% to 36.5% upside for investors at the time of writing.
Macquarie analysts confirmed their outperform rating on AGL shares and $11 target price in September. At the time of writing, this represents a potential 22.6% upside for investors over the next 12 months. The broker noted that wind power purchase agreements (PPAs), a long-term contract for a buyer to purchase electricity at a fixed price, is pricing closer to $120 per MWh (megawatt-hour). According to Macquarie, this suggests an electricity price of $150 per MWh, or higher, will be needed by 2030.
