SSE Share Forecast November 2021 – Time to Buy SSE?
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Shares of UK-based electricity and gas SSE (LSE: SSE) are in the red today after 1587p as of November 17th (17:59 GMT). It is one of the leaders among the companies listed on the LSE specializing in everything from hydroelectric power to energy storage and more experimental hydrogen energy.
SSE – Technical Analysis
SSE’s financial statement indicates a market cap of £17.542 billion with total assets worth £21.592 billion. Revenue for 2020 was at £6.83 billion with a profit margin of 33.34% compared to £7.30 billion in 2019.
Moving averages such as Exponential Moving Average (10)(1639.2), Simple Moving Average (10)( 1643.1), Exponential Moving Average (20)(1636.8), Simple Moving Average (20)(1645.5) and Exponential Moving Average (30)(1631.6) are indicating a sell signal. Oscillators such as Relative Strength Index (14)(40.3), Stochastic %K (14, 3, 3)(50.7), Commodity Channel Index (20)( −201.9), Average Directional Index (14)(16.9) and Awesome Oscillator(24.4) are neutral.
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Recent Developments
SSE is known as the third-largest supplier of gas and electricity with over 7 million customers. It supplies electricity and gas through its Southern Electric, Scottish Hydro Electric, SWALEC and Atlantic brands. It has recently rebuffed plans to break itself up, announcing a multi-billion pound plan to boost investment across its renewable energy and electricity networks businesses instead. It has faced increasing pressure from Elliot management which has a stake in the company, to split off its growing renewable energy business.
Despite this, SSE has announced an expansion of investment of £12.5 billion which is an upgrade from its previous target of £7.5 billion. This is in line with the UK’s target of reaching net-zero climate targets. The company plans to run a quarter of the UK’s offshore wind farms by the end of this decade. It also plans a fleet of flexible low carbon power plants in addition to its existing networks in the north of Scotland and parts of England. SSE will allocate 40% of the extra £1bn of green investments every year to 2026 towards its renewable energy business. The company’s recent spending spree is almost in defiance of Elliot’s calls to break up the company by splitting off its renewables business to increase the value of the group. However, shares of SSE plunged following the release of the plans by almost 5%.
Should You Buy SSE Shares?
Investors interested in SSE should also look at some of the risks associated with it. The company is planning to reduce its dividend to free up capital for investment. It will cut the dividend payout to 60p once the current inflation-linked dividend plan expires in March 2023. The company has forecasted 5% growth from 2023 to 2026. Considering that it’s a financially healthy company, the share price has a fair bit of room to increase.
Swapping income for earnings growth is a wise choice for SSE and it is looking to return £3.50 per share for the five years to March 2026. Simply looking at the company’s ambitious growth targets and its expanding presence in the renewable energy space is enough to buy the shares for any investor. However, they should also keep a close track of the risks that can affect growth in the future. Risks such as regulatory headwinds and competition in the renewable energy sector could increase asset prices, making it harder for SSE to achieve a sustainable return on investment. The amount of money the company is allowed to earn from new investments may also be limited by regulators moving forward.
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