Verbund Stock Rises Over 3% on Deutsche Bank Upgrade to 'Hold'

Shares of Austrian utility Verbund AG (VERB) rose 3.2% to €64.58 in Monday trading after Deutsche Bank upgraded its recommendation on the stock, citing an improved outlook for European wholesale power prices.

Analyst Action

In a research note, Deutsche Bank raised its rating on Verbund to "Hold" from a long-standing "Sell" position it had maintained since 2024. The bank also increased its price target on the stock to €60 from a previous €55.

The upgrade provided a lift to the stock, which had closed at €62.55 on Friday. According to the note, the change in stance reflects a more favorable medium-term earnings backdrop for the utility.

Rationale for the Upgrade

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Deutsche Bank analyst Olly Jeffery stated that the improvement in European power prices is expected to more than offset the potential impact of a profit warning that the bank anticipates from Verbund later this year. As Austria's largest electricity producer with a portfolio heavily weighted toward hydropower, Verbund's earnings are highly sensitive to wholesale electricity prices.

The bank also highlighted a potential positive catalyst from the Austrian Constitutional Court, which is currently reviewing the validity of the country's profit levy. A ruling on the matter is expected by the end of the year.

Market Context

Verbund's shares have significantly lagged their peers, underperforming the sector by approximately 65% since January 2024 and by about 6% year-to-date, according to Deutsche Bank's analysis. The upgrade marks a notable shift in the bank's perspective on the company's prospects.