One of the S&P/ASX 200 Index (ASX: XJO)'s biggest energy stocks is having a rough start to the week.
AGL Energy Ltd (ASX: AGL) shares are down 5.10% to $8.01 today after the electricity provider was hit with a broker downgrade.
The decline leaves the AGL share price down almost 14% since the beginning of 2026 and around 16% over the past 12 months.
The selling follows a warning that weak wholesale electricity prices could delay the company's earnings recovery for several years.
Here's more on that detail.
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Macquarie cuts its rating
According to The Australian, Macquarie has downgraded AGL shares from neutral to underperform and cut its price target by 12% to $7.75.
The new target sits below Friday's closing price of $8.44 and is also slightly lower than where the stock is trading today.
Macquarie believes the electricity market remains too well supplied, with wholesale power prices sitting near 5-year lows. Mild weather, additional battery storage, and growing output from wind and solar projects have all contributed to the softer pricing environment.
The broker noted that the number of hours with prices above $300 per megawatt-hour across the National Electricity Market fell 70% during the June quarter compared with a year earlier.
AGL's longer-term outlook weakens
Macquarie now expects wholesale power prices to recover in FY31, 2 years later than its previous FY29 forecast.
The broker reportedly cut its FY28 earnings forecast by 25% and lowered its FY29 estimate by 72%. It believes AGL's earnings could fall back to 2021 levels by FY28.
Macquarie's weaker outlook also takes into account the impact of data centres, which are often seen as a major source of future electricity demand. However, the broker believes this extra demand could keep coal-fired power stations operating for longer and attract more renewable generation.
This could leave the electricity market oversupplied for longer and delay a recovery in wholesale prices.
The risk would grow if the planned closures of Origin Energy Ltd (ASX: ORG)'s Eraring power station and AGL's Bayswater facility are delayed.
AGL's upcoming results in focus
The downgrade comes even after AGL lifted the lower end of its FY26 guidance in May.
The company now expects underlying EBITDA of between $2.06 billion and $2.18 billion. Underlying net profit after tax (NPAT) is forecast to come in between $610 million and $680 million.
AGL said improved plant availability, steadier consumer margins, and disciplined cost management had supported the stronger outlook.
Management also warned that FY27 could include lower wholesale prices in some regions and softer market conditions.
AGL will provide its FY27 guidance when it releases its full-year results on 12 August.
