Morgan Stanley has lowered its stance on Centrica (LON:CNA) with the British Gas owner continuing to lose customers at home and in the US, and facing further headwinds, WebFG News reports. The move came after the FTSE 100 company updated investors on its recent performance this week, standing by its full-year targets.
Centrica’s share price has jumped in London in today’s session, having added 2.70 percent to 144.70p as of 14:42 BST. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.39 percent higher at 7,764.73 points. The group’s shares have lost about a quarter of their value over the past year, as compared with about a 3.5-percent rise in the Footsie.
Morgan Stanley trims stance
Morgan Stanley downgraded Centrica from ‘equal weight’ to ‘underweight’ yesterday, also lowering its price target on the shares from 160p to 115p. WebFG News quoted the analysts as pointing to a changing landscape in North America, where competition is rising and volatile power prices could create a near-term headwind for the group, which, unlike peers, no longer has a power generation hedge.
The broker further noted that it was “disappointed with new business growth” at British Gas owner, noting that it this point, meeting its £1-billion revenue target for 2022 “looks unlikely to us”.
“We expect legacy business cash flow to deteriorate from here. This will likely force a dividend cut,” Morgan Stanley pointed out.
Other analysts on Centrica
JPMorgan Chase meanwhile remains ‘neutral’ on Centrica, without specifying a price target on the shares. According to MarketBeat, the British Gas owner currently has a consensus ‘hold’ rating and an average price target of 173.60p.
Hargreaves Lansdown weighed in on Centrica’s results earlier this week, noting that so far this year it had been “a case of one step forward, one step back”.