BofA Neutral on Atmos Energy (ATO) due to Valuation Concerns

Atmos Energy Corporation (NYSE:ATO) is one of the best high-growth utility stocks to buy. On October 16, BofA analysts downgraded Atmos to Neutral from Buy, noting that the stock has a high valuation multiple compared to others in the industry. However, the firm updated the price target from $182 to $185.

BofA observed that in comparison to industry peers, ATO is presently trading at a 22% valuation premium. The investment firm commented that the company’s growth potential is already factored into the high valuation multiple.

BofA Neutral on Atmos Energy (ATO) due to Valuation Concerns

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Although there is a possibility of higher capex requirements to advance data centers in Texas, the firm believes these opportunities will not boost short-term earnings potential much beyond what the market already anticipates.

Moreover, BofA adjusted its EPS forecast for Atmos to $7.41, $7.95, and $8.60 for FY 2025, 2026, and 2027, respectively, which are marginally higher than the prior numbers of $7.30, $7.83, and $8.52 for these years.

The updated numbers indicated an EPS CAGR of nearly 8.4%, which is higher than the company’s guidance of 6% to 8%. It factors in the effect of the Texas House Bill 4384 as well.

Atmos Energy Corporation (NYSE:ATO) is a Texas-based company that operates within the natural gas sector through two business segments: Distribution and Pipeline and Storage. The company serves residential, commercial, public, and industrial customers.

While we acknowledge the risk and potential of ATO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than ATO and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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