Goldman Sachs downgrades American Electric Power stock rating to neutral

Goldman Sachs downgrades American Electric Power stock rating to neutral

Asian shares fall on chipmaker drag, bonds cheer cooler inflation Investing.com - Goldman Sachs downgraded American Electric Power (NASDAQ:AEP) to Neutral from Buy while maintaining its price target of $147.00. Analyst Carly Davenport cited the stock’s recent outperformance following positive catalysts including capital plan increases and data center load growth expectations. Over the last twelve months, AEP shares rose 28%, outperforming the XLU’s 11% gain.

The utility’s market capitalization now stands at $72.09 billion, though InvestingPro data suggests the stock is currently overvalued relative to its Fair Value estimate. Despite the premium valuation, the company offers a 2.87% dividend yield and has raised its dividend for 16 consecutive years, according to InvestingPro Tips. The stock currently trades at a 19.1x price-to-earnings multiple on Goldman Sachs’ 2027 earnings estimates, compared to the firm’s regulated utilities coverage average of 17.8x excluding California.

Goldman Sachs said recent positive developments are now largely priced into the multiple and the risk-reward profile is balanced. AEP recently increased its five-year capital plan to $78 billion from $72 billion, which was previously raised from $54 billion. The company identified an incremental pipeline of over $10 billion in additional projects, including the Piketon transmission project, the Wyoming Bloom Fuel Cell initiative, and additional generation opportunities not yet in the base plan.

Goldman Sachs noted increased execution and regulatory risk around the Bloom and Piketon projects, which still require final regulatory approvals. Management had guided to clarity on the incremental Bloom capital expenditure to be included in the base plan by the end of the second quarter of 2026, but this has yet to materialize. Investors can access a comprehensive Pro Research Report on AEP, one of 1,400+ US equities covered, available exclusively on InvestingPro.

In other recent news, American Electric Power announced it secured a loan of up to $3.26 billion from the U.S. Department of Energy. This funding is aimed at expanding electricity transmission infrastructure across Texas, covering nearly 100 projects to enhance grid reliability. The company estimates that this initiative will save customers approximately $685 million over 30 years.

Additionally, American Electric Power has priced a $2.6 billion stock offering, with BofA Securities, Goldman Sachs & Co. LLC, and Morgan Stanley serving as lead book-running managers. Jefferies recently adjusted its price target for American Electric Power from $152 to $147, while maintaining a Buy rating on the stock. This adjustment comes as the firm views the company’s $78 billion capital plan for 2026-2030 as a baseline figure, with expectations of a formal plan refresh in the third quarter of 2026.

Meanwhile, Roman DBDR Acquisition Corp. II has appointed Hunter Gary and Al Basseri to key executive positions as it prepares for a business combination with ThomasLloyd Climate Solutions B.V. These developments highlight ongoing strategic and financial maneuvers within these companies.