Morgan Stanley picks its favorite global energy stocks — with one 'too cheap to ignore'

Published Fri, Apr 9 20212:29 AM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts at Wall Street bank Morgan Stanley have picked their favorite energy stocks, suggesting that one in particular could double in price. The investment bank chose stocks from the U.S. and around the world with high returns, attractive valuations and strong earnings. The bank's analysts, led by Stephen C. Byrd, said in a recent research note that there was one "high-quality name" that was "too cheap to ignore." The stock picks include: Brazilian firm Energisa , which has one of the "highest growth rates" in the country, Morgan Stanley's analysts said. Its current price is $44 and the bank estimates it could reach $57, giving it a potential upside of 29%. The analysts expect its earnings before interest, taxes, depreciation and amortization to grow at a compound annual growth rate of around 19%. "This is too cheap to ignore, in our view, for a high-quality name that has among the highest growth rates in our coverage," Morgan Stanley's analysts said. American Electric Power is the bank's top U.S. pick as it is set to move away from coal to wind power, meaning above-average growth in earnings per share (EPS) and above-average decarbonization as a proportion of its portfolio. Its current price is $86 and the bank estimates it has a potential upside of 16%, meaning it could reach $99. In India, Morgan Stanley likes energy conglomerate NTPC "given strong earnings, potential for increased market share, and move to become a more integrated player across various technologies, including renewables, storage, and EV (electric vehicle) charging." It has an upside potential of 33%, according to the bank. Thailand's Electricity Generating Public Co has an upside potential of an impressive 101% according to Morgan Stanley, and it likes the stock for its strong growth in EPS, "efficient" balance sheet and overseas expansion. In Indonesia, Perusahaan Gas Negara is a pick, for its "combination of better-than-expected gas distribution margins, higher power and industrial demand" according to Morgan Stanley. Its upside potential is 36%. Morgan Stanley assessed stocks based on measures including risk-adjusted earnings growth and the regulatory environment of different regions. The above stocks are all included on its buy-rated list.

Jub Rubjob | Moment | Getty Images

Analysts at Wall Street bank Morgan Stanley have picked their favorite energy stocks, suggesting that one in particular could double in price.

The investment bank chose stocks from the U.S. and around the world with high returns, attractive valuations and strong earnings.

The bank's analysts, led by Stephen C. Byrd, said in a recent research note that there was one "high-quality name" that was "too cheap to ignore."

The stock picks include: