Greencoat UK Wind share price has dipped: Buy the dip?

By:
on Aug 17, 2023
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  • Greencoat UK Wind stock price has dropped by more than 14% from the YTD high.
  • There are concerns about wind energy and rising interest rates in the UK.
  • The outlook for the stock is moderately bearish for now.

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Greencoat UK Wind (LON: UKW) share price has come under intense pressure in the past few months as concerns about renewable energy continue. The shares retreated to a low of 136.8p on Thursday, the lowest level since July 18th.

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Is UKW a good investment?

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Greencoat UK Wind is a leading fund with over £10 billion in assets under management (AUM). The fund’s mandate is to invest in renewable energy sources in industries like wind, solar, bioenergy, and renewable heat. As the name suggests, most of its investments are in the wind sector, where it owns 46 wind farms in the UK and has a 6% market share.

The most recent results showed that the company generated £400.5 million in revenues. It had operating expenses of £90 million in the first half of the year leading to a wind farm cash flow of £237 million. Its profit for the period was £65 million, down from £566 million in the same period in 2023.

Greencoat spends a lot of money in acquisitions. In the first half of the year, it acquired a stake in London Array wind farm from Orsted. It also acquired a s South Kyle wind farm and most recently, it bought Array offshore wind farm in Kent. 

Analysts believe that Greencoat is an efficiently managed asset-light company that has provided consistent returns to shareholders. It has a robust balance sheet, helped by its insistence of self-funding. Most importantly, the company’s dividend payouts are adjusted to inflation.

Still, there are some concerns, which explains why Greencoat shares have struggled recently. First, the firm will need to refinance some of its debt, which could be expensive because of the rising inflation. There are also some policy issues in the UK and concerns about the wind energy industry as the wind turbine failure rates rise.

Greencoat UK Wind share price forecast

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The daily chart shows that the UKW stock price has been under pressure for a while. It has plunged by more than 14% from the highest level this year, meaning it is in a correction. The stock has also dropped below the 50-day and 100-day exponential moving averages while the Relative Strength Index (RSI) has moved below the neutral level of 50.

Therefore, my short-term view of the stock is bearish, with the next level to watch being at 133p.1p. A break below that level will see it drop below the next key support at 130p.

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