December 2023

There was a strong rebound in equity markets in 2023, with a significant turnaround from 2022, despite the negative correction between August and October. The rebound characterized most markets with the Eurostoxx 50 Index up 19.5 percent, S&P 500 up 25.83 percent and Nasdaq up 54.67 percent, thanks to the pull of technology stocks, which by their nature are more linked to economic growth themes.

At the country level, the Italian FTSEMIB (+34.36%) clearly outperformed the other major European indices – Ibex (+28.06%, Spain), CAC (+20.50%, France) and DAX (+19.98%, Germany) – thanks also to greater exposure to the banking sector, a beneficiary of the rate hike.

During the year, inflation trends and expectations about Central Banks’ policies to contain it were two of the most important factors on the performance of European and U.S. equity markets. In the first part of the year, Central Banks remained focused on fighting inflation: between January and July, the FED raised rates by 100bp bringing the Fed Fund Rate (interbank rate) to 5.25-5.50%, and the ECB raised rates between January and early August by 200bp, bringing the refinancing rate to 4.5% and the deposit rate to 4.0%.

Equity markets, which had performed well until the beginning of August, subsequently began a bearish phase, which closed with the month of October; this was mainly dictated by fears of further rate hikes and/or maintenance of current high levels for a long time, signs of inflation resilience, increased geopolitical risk and fears of possible negative actions by rating agencies. That phase saw U.S. and Eurozone 10-year rates peak in the second half of October-at 4.99% for the U.S. treasury, 2.97% for the bund, and 4.98% for the BTP on the 10-year maturity, up respectively ì 112bp, 40bp and 28bp versus beginning of the year levels.

In November, equity and bond markets reversed on expectations that the Central Banks’ bullish phase had come to an end, thanks in part to favorable economic data, including still declining inflation. This phase saw a rotation away from the more defensive sectors, which had been the best performers in the post-summer period, toward more cyclical sectors.

Against this backdrop, Italgas stock performed well overall, closing Dec. 22 at 5.19 euros per share, 5.85 percent above the 2022 level in terms of Total Shareholders’ Return.

During the year, the stock was affected by rate volatility, with wide swings between the high and low for the period. After an initial rise, the stock corrected to touch at 5.16 euros on March 9, then recovered to reach a high for the year, at 6.03 euros, on April 21. Subsequently, despite good quarterly results published on May 4, with EBITDA and Net Income 2% above consensus estimates, Italgas shares underwent a correction that brought the price back to test 5.25 euros on May 25 partly due to the ex-dividend of 0.317 euros per share, before recovering to 5.62 euros on June 13, partly on the back of the news of the preliminary agreement signed for the acquisition of Veolia’s water assets in Italy and expectations regarding the presentation of the 2023-2029 business plan.

In October, Italgas’ stock, by virtue of the inverse correlation to interest rates, touched lows for the year at 4.71 euros, then recovered to 5.19 euros per share in the next phase, supported also by the positive third quarter results, which saw the confirmation of guidance.

The 13 brokers covering Italgas stock today present a consensus target price of 5.85 euros. Given the prices of recent stock market sessions, the Italgas share price still expresses a substantial margin of appreciation over the average target price.

Analysts’ target prices are distributed between a low of 5.3 euros and a high of 7.0 euros. Because of this valuation framework, broker recommendations are generally favorable, with six analysts suggesting buying the stock and five presenting a neutral rating. There are only two negative recommendations.