Deutsche Bank downgraded Enagas and Italgas in a broader update on European utilities, citing valuation changes after strong share price performance, while maintaining a generally positive sector outlook into 2026.
Stay informed beyond the headlines with premium market insight, AI stock picks, and deep research tools from InvestingPro - 55% off today Shares of Enagas and Italgas were down 2% and 1.7%, respectively, at 07:30 ET (12:30 GMT).
Enagas was cut to “sell” from “hold,” with its target price reduced to €12 from €12.80. Deutsche Bank said the downgrade reflects limited upside and highlighted the potential for disappointment linked to a regulatory review. The brokerage lowered its view without changing its broader stance on the sector.
Italgas was downgraded to “hold” from “buy” after its share price doubled. Deutsche Bank raised the target price slightly to €10.30 from €10, but said the re-rating left less material upside at current levels. The downgrade was framed around valuation rather than a change in business outlook.
The downgrades came as Deutsche Bank noted that European utilities outperformed more than any other sector last year, marking their strongest relative performance since 2007.
The brokerage said the rally has reduced upside potential across parts of the sector, even as earnings growth is accelerating.
Deutsche Bank said the sector is trading at a 4% discount on year-ahead price-to-earnings compared with a historical norm of parity.
The absolute forward P/E of 13.5x was described as broadly in line with long-run averages. Consensus forecasts now point to earnings per share growth of about 7% per year over the next two years, up from 4% a year ago.
The analysts said enthusiasm around rising network capital expenditure and data centre-driven power demand contributed to earlier gains, but noted that expectations for strong near-term demand growth may be overstated. It added that affordability is emerging as a theme across the sector.
Alongside the downgrades, Deutsche Bank made multiple target price and recommendation changes across European utilities, including maintaining “sell” ratings on Red Electrica, Verbund and Fortum, while keeping “buy” ratings on companies such as Engie, E.ON, Iberdrola, National Grid PLC, RWE and SSE.
Deutsche Bank said rising risks are unlikely to derail near-term growth, but added that the sector’s recent performance has narrowed the margin for further gains.
