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(Sharecast News) - Pennon tumbled on Monday after Deutsche Bank cut its stance on the stock to 'hold' from 'buy' and slashed the price target to 380p from 550p.
The bank said it still believes there is a high chance of success in Pennon's turnaround, with strong new leadership.
"Successful execution should leave the company much better positioned looking into the 2030-35 regulatory period," it said. "However, the near-term buy case now looks increasingly difficult, for several reasons."
DB pointed to the lack of clear medium-term earnings or return guidance, which it said makes it harder to have visibility on Pennon getting to a better place.
It also highlighted stable earnings per share. Deutsche said it now forecast EPS of 26p in 2026/27, remaining at 25p in 2029/30. "The lack of growth contrasts with other utilities (we previously forecast 9% EPS compound annual growth rate)," it said.
Finally, DB pointed out that returns are below cost of equity. "During the remainder of this regulatory period, we see equity returns below the cost of equity, averaging around 7% nominal (versus 9.7%)."
At 0917 BST, the shares were down 9.9% at 321.60p.
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