Shares of Engie dropped nearly 2% on Thursday following a downgrade by JPMorgan, which moved the stock from Overweight to Neutral. The bank's analyst, Javier Garrido, said the market now has a clearer grasp of Engie's equity story and that a significant portion of the rerating potential has already been realized.
JPMorgan highlighted a marked narrowing in Engie's valuation gap with peers, noting the stock now trades at about 14 times fiscal 2026 (FY26) earnings after advancing from roughly 10 times at the start of last October. That compression in the multiple underpins the bank's more cautious stance.
Garrido pointed to Engie's recent ability to outpace expectations despite several headwinds. "The company in recent years has repeatedly exceeded expectations despite headwinds including lower prices & volatility," he said, framing the recent rally as an opportunity for investors to lock in gains: he views the share price outperformance "as an opportunity to take profits."
On near-term results, the analyst expects Engie to confirm adjusted net income at the upper end of its 2025 guidance range. JPMorgan's specific forecast for 2025 adjusted net income is €4.82 billion, which falls within the company's stated range of €4.4 billion to €5.0 billion.
Looking to 2026, JPMorgan anticipates the company will position that year as the trough for net income and expects confirmation of the company's guidance range of €4.2 billion to €4.8 billion. For 2027, the bank expects confirmation of a guidance range of €4.4 billion to €5.0 billion.
Beyond the FY26 trough, JPMorgan models mid-single-digit earnings growth for 2027 and 2028, a pace the analyst warned "may be seen as disappointing to investors looking for higher growth from the FY26 trough." The bank indicated that for 2028 the company could guide conservatively around a midpoint of roughly €4.9 billion, a figure that "could be seen as a disappointment to the market - recent investor conversations suggest that the buyside bar is closer to €5.0bn," Garrido added.
Garrido also flagged external headwinds that could weigh on the outlook, writing: "While we are positive on the outlook for value-accretive renewables growth, we acknowledge headwinds including a strong euro (especially relative to the dollar) and softer-than-expected power forwards in France."
JPMorgan set a price target of €24.50 on Engie following the rating change.
Additional commentary included a note on valuation and investor expectations: with the rerating now largely reflected in the share price and the bank forecasting only moderate earnings growth after a 2026 trough, the case for significant multiple expansion appears diminished according to JPMorgan.
Contextual note: The forecasts, guidance ranges, valuations, and the price target above are those reported by JPMorgan and cited by the analyst in his research note.