Is AES a Good Investment?

PHOTO CREDIT: AES

OVERVIEW

The AES Corporation is a company based in the United States. The company offers electricity utility services in the United States and in many other markets around the world, including Puerto Rico, Salvador, Europe, and Asia. The company operates thousands of lines of electrical wire and operates many power plants across its markets. The company was founded in 1981.

Why You Should?

  1. AES is a great reopening play. As more people get vaccinated, they will go back to large public places and travel. This will cause an increase in the demand for electricity across the markets in which AES operates. This will benefit the company’s growth and recovery from this pandemic and will also benefit investors in the company.
  2. Unlike some of the other companies listed on the U.S. stock market, AES operates in several markets around the world. This will help the company maintain stable sales if one of its markets sees a drop in demand for electricity. This will also benefit investors in the company.
  3. AES has been reinvesting a lot of its profits back into the company in order to prepare for the future. For example, they have partnered with Siemens in order to partner for an energy storage project. Many other upgrades and partnerships in the AES system will benefit the company and its investors in the future. However, it might hurt the company in the short term.

Why You Should Not?

  1. AES faces tough competition across all of its markets. The company contracts with municipalities but these contracts can be revoked and awarded to another company. Some of these companies include Duke Energy, Consolidated Edison, and many others. This might hurt the company and might also hurt investors in the future.
  2. The COVID-19 pandemic has hurt the company as there is a decrease in demand for electricity as the commercial and industrial economy shut down or limit operations. Furthermore, travel has also been shut down or limited, something which further hurts AES. The company only looks for these impacts to be short to mid-term. This has hurt investors in the company.
  3. AES has seen lackluster profits and revenues over the past couple of financial years. This is because of higher operating costs and also due to the company’s efforts of reinvesting profits back into the company. This has hurt the company and has also hurt investors in the company.

MY OPINION

In my opinion, I think that AES is a decent long-term investment due to the companies position as a good reopening play, its operation in many markets, and its reinvestments to position itself in the future of the energy industry. However, tough competition, impacts from the COVID-19 pandemic, and its lackluster financial numbers have hurt the company and its investors.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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