SO - Dominion Energy raised to Buy at Seaport as discount vs. peers turns excessive

2023-06-05 12:38:26 ET

Dominion Energy ( NYSE: D ) +1.1% in Monday's trading after Seaport Research upgraded the stock to Buy from Neutral with a $59 price target, anticipating earnings upside potential from asset sales and AI-driven load growth.

Dominion ( D ) trades at a large discount to an average electric utility and to competitors Southern Co. ( SO ) and Duke Energy ( DUK ), making the stock's risk/reward look attractive, Seaport analyst Angie Storozynski said.

Dominion ( D ) is conducting a business review to find the most efficient sources of capital to improve its balance sheet and fund capital spending, and Storozynski said it could sell its South Carolina electric and gas utility, with Southern ( SO ) and NextEra Energy ( NEE ) the most likely buyers, possibly yielding $17B-$18B and resulting in an EPS hit $0.15 lower than that from the sale of gas utilities.

The world's largest service center is in Dominion's ( D ) Virginia service territory, and PJM expects its peak load will grow 5%-7% annually for the next decade, driven by cloud services and AI, which Storozynski said compares with flat-to-0.5% in load growth for the company's peers.

More on Dominion Energy:

• Financial and valuation comparison to sector peers
• Analysis: Dominion Energy: Still In The Bargain Bin
• Stock price return: Down 20% YTD, down 39% in the past 12 months

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