Goldman Sachs on Wednesday upgraded Snam SpA (BIT:SRG) (OTC:SNMRY) to a Buy rating from Neutral and raised its 12-month price target to EUR6.90 from EUR6.50. The firm highlighted structural shifts in European gas flows and maintained an elevated capital expenditure profile as central to its more constructive view.
The stock has delivered a strong 67.92% return over the past 12 months and is trading close to a reported 52-week high of $15.15. Goldman Sachs points to Italy's evolving role in continental gas dynamics as a key underpinning of Snam's outlook. According to the bank, Italy has moved from being a net gas receiver to serving as an important conduit for volumes transiting from North Africa into Europe, and since 2023 has generally recorded net exports at its northern border points.
Goldman Sachs expects that the emphasis on energy security across Europe will sustain Snam's annual capital expenditure at current levels. The bank quantifies that stance as approximately EUR14 billion of capex over the next five years - a figure it describes as roughly 15% above Snam's publicly stated plan. Those higher investment assumptions are a material component of Goldman Sachs' revised financial forecast.
Under Goldman Sachs' projections, Snam should achieve close to 5% earnings per share compound annual growth over the next five years. The bank notes this pace is about double the growth embedded in consensus estimates. Translating that divergence into 2030 outcomes, Goldman Sachs estimates the gap implies roughly 12% upside risk to Visible Alpha Consensus Data earnings by that year.
The firm also models a valuation shift under its assumptions, suggesting Snam would trade at about 11.5 times price-to-earnings by 2030. By contrast, the stock currently trades at a reported P/E of 15.79. Independent data cited in the analysis indicates that, on an InvestingPro basis, Snam appears overvalued relative to its Fair Value today, even as its overall financial health receives a "GREAT" score.
Other company metrics referenced in the reports include robust gross profit margins of 87.19% per InvestingPro data, and a 25-year track record of dividend payments with a current dividend yield of 2.04%.
Not all analysts moved in the same direction. Bernstein downgraded Snam's rating from Outperform to Market Perform after the stock experienced an approximately 30% rally. Bernstein's note pointed to the stock trading at an estimated 22% premium to the Regulated Asset Base by the end of fiscal 2025 as a factor in its view, while the firm nonetheless raised its own price target from EUR5.60 to EUR5.80.
These divergent analyst actions underscore differing assessments of how much of Snam's future cash flows and regulated asset growth are already reflected in the current share price. Investors assessing Snam's outlook will be balancing Goldman Sachs' higher-capex, energy-security-led case and its projected EPS trajectory against valuation signals and competing analyst skepticism.
Key points
- Goldman Sachs upgraded Snam to Buy and raised its price target to EUR6.90, citing Italy's new role as a gas conduit and sustained capex expectations.
- The bank projects about 5% EPS CAGR over the next five years and expects Snam to trade around 11.5 times earnings by 2030 under its scenario.
- Bernstein downgraded the stock to Market Perform after a 30% rally and cited a premium to the estimated Regulated Asset Base; it raised its price target to EUR5.80.
Risks and uncertainties
- Valuation risk - InvestingPro analysis flags the stock as overvalued versus its Fair Value and the current P/E is higher than Goldman Sachs' 2030 projection, which could weigh on returns.
- Market reaction to elevated capex - Goldman Sachs assumes about EUR14 billion in capex over five years (roughly 15% above Snam's plan); execution or market reassessment of that spending could affect the stock and infrastructure sector sentiment.
- Analyst divergence - Contrasting moves by major brokers create uncertainty for investor expectations and may affect market positioning in utilities and energy-infrastructure sectors.
Investors should consider how evolving analyst views, capital expenditure assumptions, and valuation comparisons to regulated asset measures may influence sentiment in gas infrastructure and utility sectors.