Xcel Energy downgraded as there is ‘little room for regulatory risk’

Wolfe Research and JPMorgan downgraded shares of Xcel Energy (NASDAQ:) in notes on Friday.

Wolfe Research analysts lowered the rating on Xcel to Peer Perform from Outperform, removing the price target.

“We are downgrading XEL to Peer Perform on the heels of the disappointing 9.25% ROE specified in the MN electric rate case’s verbal order,” they wrote. “We lower estimates and see fair value of $63-66. The CO electric rate case is worth watching now with settlement (or not) due by 6/14.”

At JPMorgan, analysts cut the stock to Neutral from Overweight, lowering the price target to $68 from $79 per share.

“This week, the MN PUC approved new electric rates for NSPM, authorizing a below average 9.25% ROE in a surprise outcome,” they expained. “Landing below our expectations and recent data points implying closer to ~9.6%, we see the outcome as disappointing relative to MN peers and reasonable assumptions from XEL into the rate case amid higher interest rates.”

While they noted that overall, XEL remains an attractive regulated story with exposure to energy transition themes across generation and transmission, they said there is “little room for the regulatory risk now highlighted by the commission’s order.”