Like other power utilities, the company might see notable changes in its pricing.
The dominant power utility in its state, Hawaiian Electric (HE 2.49%), faced a significant dip in its stock performance on Tuesday. With shares falling by 2.5%, reactions in the market were largely influenced by a recent downgrade from an analyst, casting a shadow over the company’s financial outlook.
An Analyst Becomes More Bearish
According to Julian Dumoulin-Smith from Jefferies, Hawaiian Electric is now classified as an underperform stock, shifting from his previous recommendation of a buy. This change stems from rising concerns surrounding the utility’s operational stability and future growth prospects. As analysts often do, Dumoulin-Smith scrutinized factors such as legislative pressures and uncertainties related to the company’s funding model.
Image source: Getty Images.
As part of this downgrade, Dumoulin-Smith adjusted his price target for Hawaiian Electric to $12.50 per share, down from its previous estimate. The analyst’s rationale points to warrants for caution, citing a variety of uncertainties surrounding the company’s future growth, sparked by potential changes in legislation that might affect funding and customer rates.
Hawaiian Electric Industries
Today’s Change
(-2.49%) $-0.36
Current Price
$14.09
Key Data Points
Market Cap
$2.5B
Day’s Range
$13.74 – $14.45
52wk Range
$8.75 – $15.05
Volume
3.2M
Avg Vol
3.5M
Gross Margin
7.20%
Too High a Price to Pay?
In light of these developments, one might reconsider the value of holding Hawaiian Electric shares. The current market climate, paired with the heightened sense of uncertainty surrounding regulatory frameworks and pricing structures, poses challenges not just for Hawaiian Electric, but also for the broader utility sector. With rising concerns over affordability for consumers across the nation, many power utilities are likely to face increased scrutiny regarding their pricing. This makes potential investment in Hawaiian Electric a tricky proposition, as it mirrors trends affecting other companies across the industry, reflecting broader economic concerns.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool has a disclosure policy.
