Are AGL shares a good investment right now?

Here are some factors to consider about the ASX energy giant.

| More on:
A man leans forward propped on his elbows as he holds his clasped hands to his mouth in a worried pose as he gazes at his computer screen in a home setting.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • A newly-elected board of directors has unleashed a rapid decarbonisation plan 
  • The company is shutting down some of its coal-fired stations and has an increased focus on relying on renewables such as hydrogen
  • Some brokers and analysts have praised AGL's shift in direction and recently gave the share bullish price targets

Recent developments in the AGL Energy Limited (ASX: AGL) share price could be leading investors to wonder if the company deserves a spot in their portfolios.

The question arises amid a huge recovery in the company's share price, starting on 21 October. Shares opened for $6.62 on the day and currently trade for $7.95 apiece — a 20.1% gain.

AGL's shares walked largely in step with peers in the S&P/ASX 200 Utilities Index (ASX: XUJ) over the same period, with the index recording a stunning 27.8% increase.

So to see where AGL's shares might be headed in future, and to answer if they could be a buy at their current price levels, let's recap some recent company announcements as well as some expert analysis.

Cannon-Brookes gets four directors installed on AGL board

Kicking things off is the changes made to AGL's board of directors.

Billionaire AGL major shareholder Mike Cannon-Brookes was successful in getting his four board nominees installed. This was put into effect on 15 November at the company's AGM.

The new directors include Mark Twidell, Dr Kerry Schott, Christine Holman, and John Pollaers.

As a result, the company ratified a new strategic direction.

AGL unleashes rapid decarbonisation plans

AGL will have a much greater focus on using renewable energy moving forward. This includes shutting down its Loy Yang power station in FY35, 10 years earlier than previously forecast.

Among other measures, the company also aims to use five gigawatts of renewables by 2030 and 12 gigawatts of renewables by 2036.

Recent reporting in The Australian suggested the strategy shift comes amid claims AGL is lagging behind its key rival Origin Energy Ltd (ASX: ORG) in its decarbonisation efforts.

Those comments came from global fund manager Brookfield Asset Management.

What did Brookfield say?

A Brookfield spokesperson made the following comments.

AGL has a large fleet of coal-fired generation which obviously needs to transition at some point over time.

It has arguably — up until recently at least — been further behind in its own internal plans on when that transition would occur. Whereas Origin has been a bit more front foot with that and has a detailed strategic transition plan and has given notice on Eraring for retirement.

AGL has been pulling other levers in its business to help get its carbon emissions under control — as well as being part of a possible pivot to become a green energy supplier in the market.

Last week, AGL said it would close down its Torrens Island B power station in South Australia on 30 June 2026.

My colleague James notes that the plant's closure is not anticipated to affect AGL's earnings for FY23 and that it also has a feasibility study in the works to investigate the opening of a hydrogen plant on the island.

Analysts make bullish predictions for the AGL share price

Finally, in October, two brokers were in agreement that AGL shares could represent good value moving forward.

Morgans investment advisor Jabin Hallihan gave the share a buy recommendation with a price target of $8.81. That's a possible upside of 10.88% at the time of writing.

Hallihan praised the early closure of Loy Yang as well as AGL's "positive near-term earnings".

Meanwhile, Credit Suisse analysts gave a slightly more conservative price target of $8.20 a share for a 3.2% potential upside.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

Focused man entrepreneur with glasses working, looking at laptop screen thinking about something intently while sitting in the office.
Energy Shares

Are Santos shares a screaming buy?

Goldman Sachs thinks now could be a good time to buy this energy stock.

Read more »

A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy
Energy Shares

What is getting investors excited about this ASX 200 uranium stock today?

There's a good reason why this share is charging higher on Wednesday.

Read more »

Businessman studying a high technology holographic stock market chart.
Energy Shares

Is this stock the 'best placed' of the ASX uranium shares?

This fund manager thinks so.

Read more »

Worker on a laptop at an oil and gas pipeline.
Energy Shares

Why today is a big day for Santos shares

Why is everyone talking about Santos shares today?

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Energy Shares

This ASX 200 mining stock just reported a 40% earnings jump

Investors appear pleased with this miner's performance during the first quarter.

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Energy Shares

Are beaten down Paladin Energy shares a bargain buy?

Bell Potter thinks this beaten down uranium stock could be worth picking up.

Read more »

Worker inspecting oil and gas pipeline.
Energy Shares

3 headwinds facing ASX 200 energy stocks in 2025

After a tough 12 months, what’s ahead for ASX 200 energy stocks in 2025?

Read more »

Man holding Australian dollar notes, symbolising dividends.
Energy Shares

Dividend investors: Top ASX energy shares for November

These are the energy stocks I would buy for dividend income.

Read more »