Key Takeaways:
- Record Investment: Iberdrola (IBE) is deploying capital at an unprecedented pace, with gross investments reaching a record €9 billion in the first nine months of 2025, largely focused on regulated networks.
- Price Projection: Despite the massive scale, our model suggests the stock has limited room to run, projecting a target of €20 per share by December 2027.
- Expected Returns: This target implies a meager 3.5% annualized return, suggesting that the stock’s current premium valuation has already priced in much of the future growth.
- Network Powerhouse: The company’s pivot to regulated assets is paying off, with Networks EBITDA surging 26% driven by higher rate bases in the UK, US, and Brazil.
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Iberdrola (IBE), the Spanish utility giant, is executing perfectly on its strategy to become the world’s largest electricity network operator. In the first nine months of 2025, reported net profit reached €5.3 billion, fueled by a massive expansion in its regulated business.
Management is putting its money where its mouth is. They invested €4.9 billion into networks alone (a 12% increase), growing their total regulated asset base to nearly €50 billion.
At the same time, they are recycling capital efficiently, bringing in close to €1.1 billion from the sale of non-core assets like their Smart Meters business.
However, quality comes at a price. The stock is trading near €19, and with a valuation multiple that sits at the higher end of its historical range, new investors might be buying a great company at a not-so-great price.
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What the Model Says for IBE Stock
We evaluated Iberdrola’s potential through 2027, factoring in the stability of its regulated earnings against its premium market valuation.
Our model signals “Hold.” Using a forecast of 4.4% Revenue Growth (CAGR) and 22.3% Operating Margins, the model projects the stock will inch up to €20 by the end of 2027.
This implies a 3.5% annualized return over the next two years.
While the dividend (yielding roughly 3.7%) provides a safety net, the potential for capital appreciation appears very limited. This fits the profile of a “Bond Proxy”, safe, stable, but unlikely to outperform the broader market.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for IBE stock:
1. Revenue Growth: 4.4%
Iberdrola’s growth engine is its Networks division. The company is aggressively expanding its footprint, with the UK’s RIIO-ED3 framework and new rate cases in New York and Maine expected to drive tariff increases of 10% compared to last year.
In renewables, execution is ramping up. The massive Vineyard Wind 1 project in the US is now >50% complete, and the Saint-Brieuc project in France has already produced 1,150 GWh.
We forecast consistent revenue growth of 4.4% CAGR through 2027, reflecting the predictable nature of these regulated and contracted cash flows.
2. Operating Margins: 22.3%
Iberdrola’s shift toward networks (which now account for 43% of total EBITDA) is structurally improving its margin profile by reducing exposure to volatile wholesale energy prices.
EBITDA from networks grew 26%, significantly outpacing revenue growth, demonstrating strong operational leverage.
We project operating margins to expand to 22.3%, supported by the continued integration of high-margin regulated assets and the normalization of ancillary costs in Iberia.
3. Exit P/E Multiple: 16.8x
Iberdrola currently trades at roughly 16.8x earnings, which is a premium compared to many European peers.
Our model assumes an exit multiple of 16.8x by 2027.
We chose a multiple that stays exactly where it is today. This is an optimistic assumption; it assumes that the market will continue to award Iberdrola a “quality premium” indefinitely. Even with this generous assumption, the returns are lackluster, indicating that the current price leaves very little room for error.
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What Happens If Things Go Better or Worse?
The scenarios show a skew toward low single-digit returns (these are estimates, not guaranteed returns):
- Low Case: If regulatory returns are cut or interest rates rise, the stock could stagnate, delivering a -0.6% annual return.
- Mid Case: Even with solid execution, we project a modest 4.0% annual return.
- High Case: Only if the market re-rates the stock to an even higher premium do we see a respectable 7.8% annual return.
See what analysts forecast for the next 5 years for IBE stock (Free with TIKR) >>>
How Much Upside Does Iberdrola Stock Have From Here?
With TIKR’s new Valuation Model tool, you can estimate a stock’s potential share price in under a minute.
All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
From there, TIKR calculates the potential share price and total returns under Bull, Base, and Bear scenarios so you can quickly see whether a stock looks undervalued or overvalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
