Market Overview

Wells Fargo Downgrades Sempra Energy After Monday's Spike On Activist Involvement

Wells Fargo Downgrades Sempra Energy After Monday's Spike On Activist Involvement

Sempra Energy (NYSE: SRE) has come under pressure to set its house in order following calls to overhaul its board and initiate a strategic review process by Elliott Management and Bluescape Energy.

The activist involvement sent the stock soaring Monday.

The Analyst

Wells Fargo Securities analyst Sarah Akers downgraded Sempra from Outperform to Market Perform and raised the price target from $118 to $123.

The Thesis

Following Monday's spike, Sempra shares trade at a slight premium to the regulated electric utility median, Akers said in a Monday note.

Opportunities exist to unlock value through "effective capital allocation and new growth ventures" that could materialize from a full-scale strategic and operational review, the analyst said. The LNG opportunities have a value of about $10 per share, and Sempra could have capex upside, neither of which have been accounted for, Akers said. 

The analyst is not convinced of Sempra's potential for multiple expansion, given below-average credit metrics and ongoing risks such as the impact of the Mexican election on the nation's energy policy, California wildfires and the construction timeline for a joint venture liquefied natural gas facility in Louisiana. 

"Our 12-18 month price target of $123/share (up from $118/share) is based on our sum-of-the-parts analysis (see Exhibit 1) and includes $5/share of upside potential," Akers said. 

Activist investors have ascribed a higher multiple to the natural gas facility and midstream operations, the analyst said. 

The Price Action

Sempra shares rallied 15.54 percent to $117.19 Monday after losing around 4 percent year-to-date through Friday. 

Related Links:

PG&E Removed From Goldman's Conviction List Amid California Wildfire Concerns

Utility NiSource Added To Goldman Sachs' America's Conviction Buy List: 'One Of Our Top Ideas'

Latest Ratings for SRE

Oct 2019MaintainsEqual-Weight
Oct 2019MaintainsNeutral
Oct 2019MaintainsEqual-Weight

View More Analyst Ratings for SRE
View the Latest Analyst Ratings

Posted-In: Sarah Akers Wells Fargo SecuritiesAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (SRE)

View Comments and Join the Discussion!

Latest Ratings

IBMWells FargoMaintains140.0
PNCWells FargoMaintains147.0
TWOUDA DavidsonMaintains17.0
IDYAOppenheimerInitiates Coverage On17.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at

Mid-Morning Market Update: Markets Mostly Higher; Lands' End Posts Upbeat Q1 Results

8 Biggest Price Target Changes For Tuesday