Eletrobras (ELET6): What explains the drop in shares? Is it time to buy?

The shares of Eletrobras (ELECT6) accumulate a drop of 19.7% in 2023. The poor performance is explained by two main reasons:

• energy prices deteriorated dramatically; It is
• the government’s criticisms of the company’s privatization increase fears of a renationalization.

The combination of heavy rains and an oversupply of renewable sources led to a drop in energy prices over the last 12 months. In the evaluation of USB BBit makes no sense for power generators to close sales contracts at lower levels than the current ones.

On the second topic, analysts at the bank do not believe that Eletrobras will revert to nationalization levels, since the process was approved by Congress and supervised by the Federal Audit Court (TCU).

With that in mind, UBS BB bets on a scenario of downside (downside potential) limited after the recent drop, even considering a scenario without growth, with energy prices of BRL 100/MWh in the long term. In this case, the institution does not consider the impacts of RBSE It is creek 3.

UBS BB has a buy recommendation and a target price of BRL 70 for Eletrobras shares, which implies an appreciation potential of 101.7% in relation to the last close.