Shares in Centrica PLC (LSE:CNA) received a boost this morning as brokers Citi and Barclays increased their price targets for the owner of British Gas.
In a note this morning, Citi analyst Jenny Ping said the share price already reflects a punitive power generation windfall tax in the form of a revenue cap and an extension of the tax on oil and gas.
But it does not reflect the upside risk from optionality and growth potential offered by a very profitable Rough storage asset, its core cash generative retail business and the prospect for earnings clarity once there is visibility on any government intervention, she commented.
Ping believes a windfall tax would provide a “much-needed clearing event for the shares”.
“Furthermore, in a rising rate environment, we prefer companies with little debt and robust balance sheets, qualities which Centrica already possesses,” she said.
Citi reiterated a 'buy' rating and raised its price target for Centrica to 93p from 81p.
Barclays, meanwhile, kept its 'overweight' rating and raised its price target to 144p from 121p.
The broker pointed out “markets hate uncertainty”.
“We see clarity on price caps and windfall taxes by year-end with government prioritising a targeted support mechanism vs mass support schemes.”
Shares in Centrica were up 4.5% at 76.50p.