On Thursday, Capital Power Corp. (CPX:CN) (OTC: CPXWF) experienced a revision in its stock outlook as BMO Capital Markets adjusted its price target. The new target has been set to C$38.00, a decrease from the previous C$40.00, while the firm retained a Market Perform rating on the shares.
The adjustment comes after Capital Power's first-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) failed to meet analyst expectations. Additionally, the company's 2024 financial guidance was moderated, and the capital expenditure for the Genesee repowering project was increased once more.
The analyst noted that the backwardation in Alberta power forwards—a situation where the current price of an underlying asset is higher than prices trading in the futures market—was a driving factor for Capital Power to shift focus towards growth opportunities in U.S. generation. This strategic pivot is partly attributed to the anticipated increase in power demand from data centers.
Despite the lowered price target, BMO Capital Markets maintains its Market Perform rating on the stock, citing a balanced risk/reward profile. The firm also expressed a continued comfort in holding the stock for its approximately 7% yield, despite the challenges reflected in the higher capital expenditures and the subdued outlook for 2024 EBITDA.
InvestingPro Insights
Following the recent price target adjustment by BMO Capital Markets for Capital Power Corp. (CPX:CN), InvestingPro data and tips provide additional context for investors considering the stock. With a market capitalization of $47.29 million USD and an adjusted P/E ratio over the last twelve months as of Q2 2023 sitting at 15.34, Capital Power presents itself as a company trading at a low earnings multiple, which may appeal to value-oriented investors.
Despite a notable revenue decline of 34.72% over the last twelve months as of Q2 2023, Capital Power has been able to maintain a gross profit margin of 13.69%. This suggests a level of operational efficiency even in the face of reduced revenue figures. Additionally, the company has a track record of returning value to shareholders, having raised its dividend for 10 consecutive years and paying a significant dividend, which aligns with BMO Capital Markets' comfort in the stock's yield.
InvestingPro Tips highlight that while analysts anticipate a sales decline in the current year and expect net income to drop, they also predict Capital Power will remain profitable this year. These insights, combined with the fact that the stock is trading near its 52-week low, may present an opportunity for investors looking for potential upside with a relatively low price volatility stock.
For those seeking further analysis, there are 9 additional InvestingPro Tips available, which could provide deeper insights into Capital Power's financial health and stock performance. Interested readers can access these exclusive tips and make more informed investment decisions by visiting InvestingPro's dedicated page for Capital Power at https://www.investing.com/pro/CPX. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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