BMO Capital reiterates Outperform rating on Boralex stock, cites potential asset sales

BMO Capital reiterated its Outperform rating and CDN$39.00 price target on Boralex, designating the renewable energy company a "Top 3 Best Idea" with a potential 23% total return. The firm highlights potential asset sales, specifically Canadian hydro assets, as a key catalyst to enhance long-term funding visibility, unlock value, and improve the debt/EBITDA ratio, thereby supporting future growth and highlighting the stock's undervaluation.

Analysis

BMO Capital has reiterated its Outperform rating on Boralex (BLX) with a CDN$39.00 price target, implying a potential 23% total return and designating the stock as a "Top 3 Best Idea." The core of the investment thesis centers on the potential for strategic asset sales, specifically Canadian hydro assets, to serve as a positive catalyst. Such divestitures are expected to improve visibility into the company's long-term funding plan through 2030, unlock underlying value, and highlight a perceived undervaluation in both Boralex and the broader renewable sector. BMO's analysis quantifies the balance sheet impact, estimating that every $500 million in asset sales would lower the debt/EBITDA ratio by approximately 0.3x, thereby enhancing financial flexibility for future growth. Importantly, BMO's current adjusted EBITDA estimates of $738 million for 2025, $809 million for 2026, and $824 million for 2027 do not yet incorporate the financial benefits of any asset sales, suggesting potential upside to these forecasts.

Key Decisions for Investors

• Investors should consider BMO Capital's bullish stance, supported by an 'Outperform' rating and a CDN$39.00 price target, which presents Boralex as an undervalued opportunity in the renewable energy space.
• The primary catalyst to monitor is the progress of potential asset sales, particularly of Canadian hydro assets, as their execution is key to unlocking value and strengthening the company's financial position.
• Evaluate the potential for earnings upside, as BMO's 2025-2027 EBITDA estimates do not yet account for the positive impact of deleveraging and capital recycling from future divestitures.