Morgan Stanley upgrades NRG Energy (NRG +1.1%) to Overweight from Equal Weight while downgrading Entergy (ETR -0.7%) to Equal Weight from Overweight, as part of a reshuffle of the firm's preferences in the utilities space.
Stanley analyst Stephen Byrd thinks sector outperformance vs. the broader market has resulted in a very high relative valuation for the lowest risk utility stocks, leaving opportunities to invest in names that have been left behind.
ETR has outperformed the UTY index YTD by 14% while NRG has underperformed by 16%, Byrd says, while lifting stock price targets for NRG to $49 from $47 and ETR to $115 from $114.
Byrd raises his price targets for Xcel Energy (XEL -0.5%) to $63 from $60, Ameren (AEE -1.6%) to $80 from $78 and CMS Energy (CMS -0.9%) to $63 from $59, seeing these Midwest utilities offering above-average earnings growth.
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