Spain's Top Stock: A Renewable-Energy Company That Isn't Abengoaby
Gamesa has surged 106% this year as analysts see sales rising
Abengoa has slumped a record 85%, and most analysts say sell
As 2015 draws to a close, traders in Spanish renewable-energy companies are either kicking themselves or celebrating.
Those who bet on wind-turbine maker Gamesa Corp. Tecnologica SA saw their returns more than double this year as the stock rose the most in the IBEX 35 Index. Investors in Abengoa SA shares, on the other hand, lost 85 percent through yesterday as ballooning debt and a lack of funds put the company on the brink of bankruptcy. Gamesa rose 3.4 percent by the close of trading in Madrid today, while Abengoa slid 4.3 percent.
Abengoa’s travails, largely due to its overleverage, contrast with Gamesa, whose 2015 revenue is projected to surge this year by the most since 2007 as it benefits from a pick-up in wind-turbine installations. Solar plants builder Abengoa is seeking to raise cash after reporting a nine-month loss in November.
“Gamesa is doing its homework, it knows how to ride this burgeoning industry,” said Miguel Sanchez, an equity analyst at Mirabaud & Cie. in Madrid. “It has solid financials, with a strong cash flow. In this aspect it’s the opposite of Abengoa.”
Gamesa is seeing a jump in sales and orders as leaders from U.S. President Barack Obama to India’s Prime Minister Narendra Modi roll out incentives for clean energy. In November, the company reported that nine-month profit doubled, and analysts estimate its revenue will surge 23 percent this year.
At the other side of the spectrum is Abengoa. Aggressive expansion plans led to 8.9 billion euros ($9.8 billion) of gross debt that it’s struggling to repay, just as growth in solar-panel installations has slowed. The company, which has until the end of March to reach an agreement with creditors under Spanish bankruptcy law, is at risk of becoming the country’s biggest corporate collapse. Last month, its shares got kicked out of the IBEX 35.
Media representatives for Gamesa and Abengoa declined to comment for this story.
While 13 out of 24 analysts tracked by Bloomberg recommend buying Gamesa shares, their average price estimate of 16.04 euros is just 2.9 percent higher than yesterday’s close, implying less room for the rally to continue. Five of the six analysts covering Abengoa advise selling it.
Fidelity Investment Services Ltd.’s Fabio Riccelli, whose Iberia Fund has risen 15 percent this year and beat 92 percent of its peers, says he’s increased exposure to renewable-energy companies. Gamesa and Iberdrola SA, Spain’s largest utility owner, are among his holdings.
“The potential to continue to increase efficiency and improve load factors while reducing costs should push wind energy to the mainstream of energy production over the next decade,” Riccelli said in an e-mail.