Shares in Centrica (LON:CNA) have fallen into the red in today’s session, underperforming the broader London market, as JPMorgan Cazenove trimmed its rating and price target on the British Gas owner. The move comes in the wake of the FTSE 100 company’s trading update earlier this week.
As of 14:24 BST, Centrica’s share price had lost 2.69 percent to 189.56p, underperforming the broader London market with the benchmark FTSE 100 index currently standing 0.03 percent lower at 7,383.03 points. The group’s shares have lost just under 10 percent of their value over the past year, and are down by some 18 percent in the year-to-date.
JPMorgan Cazenove slashed its rating on Centrica from ‘overweight’ to ‘underweight’ today and trimmed its price target on the shares from 265p to 180p, pointing to the ‘unsettling reality’ of UK supply market changes.
Sharecast quoted the analysts as explaining that despite the strength of the group’s UK supply operations, they saw significant downside from the price regulation of Centrica’s Standard Variable Tariff customer base. While their initial view of the damage to earnings per share stood at between -10 percent and -20 percent, the bank’s analysis of Ofgem’s regulated prepayment meter tariffs suggested a deeper EPS erosion at up to -42 percent.
JPMorgan further pointed to evidence of a price war emerging, with incumbent generation owner Engie entering the residential supply market with heavily discounted tariffs.
The downbeat comments came after Centrica reported earlier this week that its UK Home energy supply accounts were down 261,000 in the year to date. The British Gas owner is also expected to come under pressure with the UK’s ruling Conservative Party having signalled that it would cap domestic energy prices should it win next month’s snap election.
Goldman Sachs is also bearish on Centrica, having reiterated its ‘sell’ rating on the stock this week, with a price target of 194p. Beaufort Securities meanwhile sees the British Gas owner as a ‘buy,’ without specifying a valuation on the shares.