Are AGL shares a good investment right now?

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, analysts and brokers reached a consensus that the 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.

The post Are AGL shares a good investment right now? appeared first on The Motley Fool Australia.

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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.

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