Why Hawaiian Electric Stock Slumped Today
Key Points
One analyst made quite the bearish adjustment to his take on the utility.
He now believes investors should sell the stock.
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The dominant power utility in its state, Hawaiian Electric (NYSE: HE) wasn't looking all that mighty on the stock exchange Tuesday. The company's shares fell 2.5% after an analyst downgraded its rating.
An analyst becomes more bearish
Hawaiian Electric is a stock investors should sell these days, at least according to the latest update from Jefferies' Julian Dumoulin-Smith. On Tuesday morning, the pundit pulled the lever on a recommendation downgrade, rerating Hawaiian Electric as an underperform (sell, in other words) from his previous buy.
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Accompanying this, Dumoulin-Smith lopped $1 off his price target for the stock; this is now $12.50 per share.
According to reports, the analyst's new view of Hawaiian Electric is largely based on uncertainty about its business. He believes the stock has reached a degree of parity with other electric utility titles; however, it has more question marks in front of it, notably legislative decisions on its funding and the rates it can charge customers.
Too high a price to pay?
While I wouldn't necessarily rush to sell Hawaiian Electric shares, I'd say that the uncertainty -- particularly with pricing -- wouldn't inspire me to buy the stock, either. However, I'd point out that given the rising concerns about affordability in this country, Hawaiian Electric isn't the only power utility likely to come under increased pressure for its pricing.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Jefferies Financial Group. The Motley Fool has a disclosure policy.
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