Wolfe Research has upgraded American Electric Power (NASDAQ:AEP) from Peerperform to Outperform and put a price target of $142.00 on the shares, a level the firm says is consistent with InvestingPro’s Fair Value view which indicates the stock is slightly undervalued today.
The research note credited AEP with "executing well under new management" and said the company has been widening its set of potential growth opportunities. Over the last twelve months AEP recorded 10.93% revenue growth, a metric Wolfe highlighted when framing its more bullish stance.
Wolfe Research pointed to several tangible supports for the upgraded rating. The firm emphasized an expected capital expenditure program in the range of $5-8 billion and singled out "rising large load growth potential" as a factor that bolsters the investment case.
Market reaction to the upgrade was immediate - shares rose roughly 3% on the news - but Wolfe noted that even with that move the stock remains priced well below higher-growth utility peers. The shares are trading close to a 52-week high of $128.92 and have produced a 29.37% total return over the prior twelve months.
On valuation and shareholder returns, Wolfe Research sees scope for both price-to-earnings multiple expansion and earnings-per-share upside for the utility. The company is trading at a P/E ratio of 18.36. AEP’s long record of shareholder distributions is also notable: the company has paid dividends for 56 consecutive years.
InvestingPro assigns AEP a "GREAT" financial health score and provides a comprehensive Pro Research Report on the company for subscribers, according to the note.
Complementing the analyst upgrade, American Electric Power released its fourth-quarter 2025 results, which further supported the upbeat narrative. The company reported operating earnings of $1.19 per share, above analyst estimates of $1.14, and revenue of $5.31 billion, higher than the consensus expectation of $4.99 billion. Alongside the quarterly beat, AEP reaffirmed its outlook for 2026.
These financial results and the reiterated guidance were met with positive market activity and were cited in analysts’ reassessments of the stock. Together, the Wolfe upgrade and the stronger-than-expected quarter form the basis for the current investor case.
Key points
- Wolfe Research upgraded AEP to Outperform and set a $142.00 price target, aligning with InvestingPro’s Fair Value that suggests slight undervaluation - sectors impacted: Utilities, Equity Markets.
- Company delivered 10.93% revenue growth over the past 12 months and reported Q4 2025 operating earnings of $1.19 per share versus $1.14 expected - sectors impacted: Energy, Capital Markets.
- Principal supports for the upgrade include a $5-8 billion capex plan and rising large load growth potential; stock trades near a 52-week high after a 29.37% total return over the past year.
Risks and uncertainties
- Despite the upgrade, Wolfe notes AEP still trades below high-growth peers - market/valuation risk for equity investors in the Utilities sector.
- Projected capital expenditure of $5-8 billion introduces execution and financing risk tied to the company’s investment program - relevant to investors in Energy and Credit markets.
- Future earnings and multiple expansion remain subject to operational performance and market sentiment, which can affect the stock and the broader utility sector.