If you ever needed proof that markets can party too hard on a and wake up deeply embarrassed, SSE PLC (LSE:SSE) just provided the case study.
Citi, arriving like the sensible friend with a jug of water and a lecture, has cut the stock to 'sell' and the shares duly slipped 2.3% to 2,211p.
Citi’s message is essentially: calm down, everyone.
The equity issue has cleared the near-term fog, and the 2029/30 earnings-per-share ambition of 225 to 250p gives analysts something solid to plug into their spreadsheets.
But the stock has been behaving like it has discovered a new law of physics, rising 18% in the last five trading days and close to 40% over two months.
Citi argues the rally is out of sync with reality. Consensus earnings are unlikely to shift much, with Bloomberg’s 2029/30 estimate at 233p, while the valuation now implies a 65% premium to the regulated asset base or roughly 10 times enterprise value to renewables EBITDA.
The dividend yield is also slipping below 3%. Add a decade of falling renewable output and ongoing uncertainty over the electricity distribution sale, and the exuberance starts to look misplaced.
Hence the verdict: Sell, with a twelve-month price target of £19.97. SSE has had a great run, but Citi thinks the sugar rush is wearing off.