SO - Southern raised at Morgan Stanley as low-risk earnings replaces Voglte worries

2023-08-10 14:56:36 ET

Southern Co. ( NYSE: SO ) +0.3% in Thursday's trading as J.P. Morgan upgraded the stock to Equal Weight from Underweight with a $69 price target, raised from $60, seeing reduced risk as the company nears completion of the Vogtle nuclear project.

"We see a valid case for the stock to price in the company's constructive regulatory backdrop, low-risk earnings outlook, and above-average balance sheet while removing the Vogtle discount," and these factors now merit a premium valuation for Southern ( SO ) shares, Morgan Stanley's David Arcaro wrote.

The first unit of the Vogtle new nuclear plant is finally operational, and "having one of the two units up and running is a key risk-reducing factor for both the outlook for the second unit and the upcoming regulatory approvals," according to Arcaro.

As a result, the analyst sees "much less downside risk to equityholders from the remaining milestones toward completion of the project and regulatory approval, all of which is likely to come by H1 2024," adding Southern ( SO ) has a "stronger than average regulatory backdrop with better visibility than most utilities following a multi-year plan recently approved in Georgia and predictable mechanisms in other states."

More on Southern Co.:

• Financial and valuation comparison to sector peers
• Analysis: Southern Company: A Top-Tier Utility Yielding 4%, Trading 16% Below Its Highs
• Stock price return: Down 3% YTD, down 11.5% in the past 12 months

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