Terna stock rating upgraded to Outperform by RBC on sustained growth outlook

RBC Capital upgraded Terna SpA (TRN) to Outperform from Sector Perform, raising its price target to EUR9.60 from EUR8.60, asserting that the stock's recent underperformance has concluded. The upgrade is driven by expectations of consistent mid-single-digit EPS growth through 2030, supported by robust 7% Regulatory Asset Base growth and a favorable cost of debt evolution. While Terna's 2025 EPS growth may be below peers, RBC anticipates improved comparative growth from 2026, further bolstered by a promising incentives framework.

Analysis

RBC Capital has upgraded Terna SpA to Outperform from Sector Perform, increasing its price target to EUR9.60 from EUR8.60. The upgrade is predicated on the view that the stock's recent period of underperformance, driven by expectations of weak 2025 earnings growth, has concluded. RBC projects a positive long-term trajectory, forecasting consistent mid-single-digit EPS growth through 2030, supported by a robust 7% Regulatory Asset Base (RAB) growth. While acknowledging that Terna's EPS growth in 2025 may be the weakest among its Italian peers at below 2%, the firm anticipates a significant improvement in its comparative growth profile from 2026 onward. Key catalysts for this improved outlook include a favorable evolution in the company's cost of debt, which is expected to mitigate potential risks, and a promising new incentives framework under ROSS Integrale that could further accelerate EPS growth for the Italian electricity grid operator.

Key Decisions for Investors

• Investors could view the RBC upgrade as a signal that the recent share price weakness represents a favorable entry point, given the long-term outlook of sustained EPS and RAB growth through 2030.
• Be prepared for potential near-term underperformance in 2025, as Terna's EPS growth is forecast to lag its Italian peers before an expected acceleration from 2026 onwards.
• Monitor developments related to Terna's cost of debt and the finalization of the ROSS Integrale incentives framework, as these are cited as critical positive catalysts for the investment thesis.