At time of writing, the share price of AGL Energy Ltd [ASX:AGL] is down a further 4%, trading at $8.69.
You can see the savage downtrend playing out for the AGL share price in the chart below:
That’s five years of trading, mind you. AGL shareholders may be wondering, when will the bloodletting stop? This article takes a quick look at the CEO exiting and how you can wrap your head around the business and the outlook for AGL.
AGL CEO Brett Redman calls it quits
‘Mr Redman told the board he could not commit to seeing through the full demerger of Australia’s oldest energy utility, which involved hiving off its huge coal power plants into a separate business and turning its retail arm into a zero-carbon electricity supplier.
‘Mr Redman spent 15 years at the company including the past two-and-a-half years as CEO.’
Based on the chart alone, you can see that AGL made a number of missteps over the last four years.
For instance, their legacy wind farms hurt, and Origin downgraded earnings recently to go with a $2.7 billion writedown by AGL.
Shows how tricky the energy game in Australia is…
Here’s the thing though, AGL is still a relatively big business.
They have a market cap of $5 billion which reflects the serious headwinds.
But will they go the way of AMP Ltd [ASX:AMP]?
Here’s an idea at what I think the outlook for AGL is.
Outlook for AGL Share Price
AGL is going through an energy schism, that much is clear.
The announcement dated 30 March outlined how they would split:
‘• “New AGL” Australia’s largest multi-product energy retailer, leading the transition to a low carbon future; and
‘• “PrimeCo” Australia’s largest electricity generator, supporting our economy as the energy market evolves.’
A messy split if there ever was one, and there’s a large amount to digest here.
That being said, here’s what AGL revised its guidance to:
‘Underlying Profit after tax for FY21 to be between $500 million and $580 million, down from …$560 million to $660 million.’
Not the absolute worst against the current market cap, but it’s hard to see where the growth comes from in future years.
So as an investor, you could sit on your AGL shares hoping for a turnaround, which from a charting perspective, looks a long way off.
Alternatively, you could take a plunge on more nimble players in the renewable energy revolution.
Or you could look for value gems in this environment, based on solid fundamentals and real earnings. The types of companies that could outpace AGL shares as the economy recovers while rates stay low.
That’s what The Rum Rebellion Editor Greg Canavan specialises in.
You can learn all about his strategy for ‘Life at Zero’ right here.
It’s a compelling watch and he gives you his favourite stock for 2021.
For The Rum Rebellion
PS: Three Deep Value Stocks Currently Under-Priced: These ASX gems could potentially deliver market-beating returns as the economy recovers. Click here to learn more.