IBE: Key Market Power Demand Will Support Operations Amid Mixed Ratings Narrative

Analysts have nudged their fair value estimate for Iberdrola slightly higher to EUR 17.15 from EUR 17.06, citing a stronger multiyear revenue growth outlook and supportive recent rating and target price revisions despite some dissenting views.

Analyst Commentary

Street research remains divided on Iberdrola, with recent rating changes and target price revisions underscoring a debate around how much of the multiyear growth story is already reflected in the share price.

While bullish analysts point to accelerating demand and improved earnings visibility in key geographies, more cautious voices highlight valuation constraints versus near term regulatory and macro uncertainties.

Bullish Takeaways

• Bullish analysts argue that structurally higher electricity demand, particularly in the U.S. and UK, underpins a more robust top line trajectory and supports the recent upward drift in fair value estimates.
• Upgrades to positive ratings are framed around Iberdrola's execution in regulated and quasi regulated networks, which is seen as de risking cash flows and justifying a premium versus traditional utilities peers.
• Upward revisions to price targets, even if incremental, are interpreted as confirmation that consensus had been too conservative on medium term growth and capex returns.
• Some analysts highlight that the growing visibility on renewables and grid investment plans could catalyze further multiple expansion, provided project delivery continues to track or beat guidance.

Bearish Takeaways

• Bearish analysts see limited upside from current levels. At least one has set a target price below the latest fair value estimate, implying downside risk if execution stumbles or macro conditions soften.
• Concerns center on valuation compression risk, as the shares already trade at a premium to many European utilities. This leaves less margin of safety if regulatory frameworks or power prices turn less supportive.
• More cautious views also flag potential delays or cost inflation in large scale network and renewables projects, which could pressure returns on invested capital and weigh on earnings momentum.
• There is also some unease around currency and political risk in non domestic markets, which could introduce volatility to cash flows and challenge the current growth driven narrative embedded in the valuation.

What's in the News

• Storm damage at Iberdrola's Flyers Creek wind farm in Australia caused a GE Vernova turbine blade to bend in half. The company removed the unit from service, established an exclusion zone, and ordered a replacement blade while working on a safe return-to-operation plan (Recharge News).
• Iberdrola signed a 10 year renewable hydrogen energy agreement with IFF to power a new nature based hydrogen production facility at IFF's Benicarló fragrance ingredients plant in Spain, enabling annual production of 100 tons of green hydrogen.
• The green hydrogen supplied under the Iberdrola IFF agreement will be used in hydrogenation reactions for more than 50 key fragrance ingredients, supporting IFF's goal to eliminate 2,000 tons of CO2 emissions per year and advance toward its 2030 emissions reduction targets.

Valuation Changes

• Fair Value Estimate has risen slightly to €17.15 from €17.06, reflecting a modest upward adjustment in long term fundamentals.
• Discount Rate is unchanged at 7.65 percent, indicating no shift in perceived risk profile or cost of capital assumptions.
• Revenue Growth has increased meaningfully to approximately 4.67 percent from 4.07 percent, signaling stronger expectations for top line expansion.
• Net Profit Margin has edged down slightly to about 13.88 percent from 14.19 percent, suggesting a modestly more conservative view on profitability.
• Future P/E has risen moderately to roughly 25.6 times from 23.8 times, implying a higher valuation multiple applied to forward earnings.