Rising Funding Costs Will Deepen Renewables Overvaluation Concerns

Key Takeaways

• Overly optimistic expectations for revenue growth may falter as new market entrants and softening power prices erode demand and margins for renewables.
  
• Rising costs and shifting asset valuations threaten profitability, while slower expansion and deleveraging strategies may limit future growth opportunities.
  
• Diversified growth, resilient margins, and financial flexibility position Acciona Energías Renovables for long-term stability and value despite evolving industry and market dynamics.

Catalysts

Corporación Acciona Energías Renovables, S.A.

• Investors may expect that the recent momentum in global decarbonization policies, electrification, and climate initiatives will lead to sustained higher recurring demand and pricing for renewables, potentially overestimating long-term revenue growth for Acciona Energías Renovables despite possible moderation as more capacity enters the market.
  
• Current asset rotation strategies are delivering large capital gains at high multiples, but if valuations revert or buyer appetite wanes, future asset rotation proceeds and exceptional profits could fall, risking a significant drag on EBITDA and net profit growth.
  
• There is a risk that rising financing and construction costs-driven by higher global interest rates and ongoing supply chain/geopolitical challenges-will compress project returns and net margins in coming years, especially as new build is increasingly exposed to volatility in the U.S. and other international markets.
  
• Slower capacity additions (after two years of rapid expansion) and a strategic shift toward balance sheet deleveraging may lead to flat or lower net installed capacity and limit scale-driven revenue growth, contrary to current market optimism.
  
• Softening wholesale power prices in international markets (e.g., North America and Australia) and the anticipated commoditization of renewable generation could pressure capture prices and reduce margins, particularly as more new capacity and competitors come online.

Corporación Acciona Energías Renovables Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Corporación Acciona Energías Renovables's revenue will decrease by 12.9% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 16.5% today to 11.6% in 3 years time.
• Analysts expect earnings to reach €346.6 million (and earnings per share of €1.08) by about September 2028, down from €747.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €451.6 million in earnings, and the most bearish expecting €263 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.5x on those 2028 earnings, up from 9.7x today. This future PE is greater than the current PE for the ES Renewable Energy industry at 18.8x.
• Analysts expect the number of shares outstanding to grow by 0.07% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.83%, as per the Simply Wall St company report.

Corporación Acciona Energías Renovables Future Earnings Per Share Growth

Risks

• Strong structural tailwinds for global renewables-such as irreversible climate action, falling technology costs, and exponential growth in sectors like clean energy, electrification, and grid infrastructure-are projected to drive sustained long-term demand and higher average prices, supporting revenue and margin resilience for Acciona Energías Renovables.
  
• The company has maintained or increased full-year EBITDA guidance, demonstrated robust asset rotation proceeds significantly above the firm's share price, and is in advanced negotiation for further high-value asset rotations-indicating resilient earnings quality, flexibility, and an ability to unlock value beyond core generation activities.
  
• Acciona's deep and geographically diversified project pipeline (spanning Europe, the Americas, Asia-Pacific, and OECD countries) reduces dependency on any single market or regulatory environment and positions the company for steady, long-term revenue growth and risk mitigation.
  
• Operational excellence and strong margin recovery, particularly in subsidiaries like Nordex (with a 59% EBITDA increase, growing order book, and margin progress), point to improving cost leadership and potential margin expansion, supporting upward earning trends and potential for higher net income.
  
• The flexibility to dynamically moderate CapEx and asset rotation, paired with robust balance sheet management and confirmed investment-grade ratings, gives Acciona Energías Renovables strong financial optionality to weather short-term volatility, invest opportunistically, and maintain stable or growing dividends-bolstering long-term shareholder value and earnings stability.

Valuation

• The analysts have a consensus price target of €22.921 for Corporación Acciona Energías Renovables based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €29.05, and the most bearish reporting a price target of just €17.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €3.0 billion, earnings will come to €346.6 million, and it would be trading on a PE ratio of 28.5x, assuming you use a discount rate of 9.8%.
• Given the current share price of €22.42, the analyst price target of €22.92 is 2.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.