Sempra
SRE
$82.89
-5.14%
Sempra is a diversified utilities company that distributes natural gas and electricity in Southern California and owns 80% of Oncor, a transmission and distribution business in Texas, while also operating liquefied natural gas facilities in North America and infrastructure in Mexico through its 25%-owned Sempra Infrastructure Partners. As one of the largest utility customer bases in the U.S., Sempra holds a distinct position as a major regulated utility player with a growing presence in LNG exports, which sets it apart from pure-play utilities. The current investor narrative centers on the company's strategic focus on expanding its infrastructure and LNG capabilities, alongside a recent push to simplify its capital structure by retiring preferred stock, which is seen as a positive step for financial flexibility. However, the stock has faced downward pressure in recent months, with a notable decline in price, prompting debate about the impact of rising interest rates and regulatory dynamics on its growth prospects.…
SRE
Sempra
$82.89
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Investment Opinion: Should I buy SRE Today?
Based on the analysis, I assign a Buy rating to Sempra (SRE). The thesis is that the company's regulated utility base provides stable cash flows, while the LNG expansion and infrastructure investments offer growth optionality that is not fully reflected in the current price. The analyst consensus is Buy with an average target of $104.69, implying 21.2% upside, and the forward PE of 15.6x is attractive relative to the expected EPS growth.
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SRE 12-Month Price Forecast
The AI assessment is bullish with medium confidence, as the valuation metrics suggest the market is pricing in significant earnings growth that, if realized, would make the stock undervalued. However, the recent revenue decline and negative free cash flow introduce uncertainty. The stance would be upgraded to high confidence if revenue growth turns positive and free cash flow improves, while a downgrade to neutral would occur if earnings estimates are cut or the stock breaks below $80.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Sempra's 12-month outlook, with a consensus price target around $104.62 and implied upside of +26.2% versus the current price.
Average Target
$104.62
0 analysts
Implied Upside
+26.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$93 - $118
Analyst target range
The target price range spans from a low of $93.00 to a high of $118.00, with the average at $104.69. The high target of $118.00 suggests that some analysts see potential for significant upside, likely driven by successful execution of the LNG projects and continued growth in the Texas utility business, while the low target of $93.00 still represents an upside from current levels, indicating that even the most bearish analyst sees value. The spread between the low and high targets is approximately 26.9%, which is moderate, reflecting some uncertainty but overall conviction in the company's growth story. Recent institutional ratings have been consistently positive, with no downgrades, reinforcing the bullish outlook.
Bulls vs Bears: SRE Investment Factors
Sempra presents a mixed picture: the bull case rests on a low forward PE, analyst optimism, and a stable regulated utility base, while the bear case highlights revenue decline, negative free cash flow, and high leverage. Currently, the bearish evidence is slightly stronger given the recent price decline and underperformance, but the potential for earnings growth from LNG and infrastructure projects could tilt the balance. The key tension is whether the company can convert its heavy capital investments into the expected EPS growth (forward PE of 15.6x) before rising interest costs and cash burn erode investor confidence. If earnings growth materializes, the stock is undervalued; if not, the high payout ratio and debt burden could lead to further downside.
Bullish
- Analyst consensus Buy with 21% upside: The average analyst target price is $104.69, representing a 21.2% upside from the current price of $86.41. With 18 analysts covering and a mean recommendation of 1.65 (Buy), the Street remains constructive on Sempra's growth trajectory.
- Forward PE of 15.6x implies earnings growth: The trailing PE is 32.1x, but the forward PE drops to 15.6x, indicating the market expects significant EPS expansion. Analysts estimate average EPS of $7.16 for the next fiscal year, up from the trailing EPS of $2.69, driven by infrastructure investments and LNG projects.
- Strong regulated utility base with 80% Oncor stake: Sempra owns 80% of Oncor, a Texas transmission and distribution utility, providing stable, rate-regulated cash flows. The Utilities segment generated $3.238 billion in Q1 2026 revenue, accounting for 88.6% of total revenue, underpinning earnings visibility.
- LNG expansion offers growth optionality: Sempra's 25% stake in Sempra Infrastructure Partners includes LNG facilities in North America, positioning the company to benefit from growing global gas demand. This differentiates Sempra from pure-play utilities and supports the higher forward earnings estimates.
Bearish
- Revenue declined 3.8% YoY in Q1 2026: Q1 2026 revenue was $3.655 billion, down from $3.798 billion in Q1 2025, a -3.77% year-over-year decline. This deceleration raises concerns about the company's ability to grow its top line, especially in a rising rate environment.
- Negative free cash flow of -$5.8 billion TTM: Sempra's trailing twelve-month free cash flow is -$5.8 billion, reflecting heavy capital expenditures for infrastructure projects. This cash burn necessitates external financing, increasing financial risk if interest rates remain elevated.
- High debt-to-equity ratio of 1.15: With a debt-to-equity ratio of 1.15, Sempra carries substantial leverage. Rising interest rates increase interest expenses (Q1 2026 interest expense was $382 million), which could pressure net margins and dividend sustainability.
- Stock underperforming market significantly: Sempra's 1-year return is +5.5% versus the S&P 500's +20.4%, and the 6-month relative strength is -22.7%. The stock has fallen 8.8% over the past 6 months, indicating persistent selling pressure and negative momentum.
SRE Technical Analysis
Sempra's stock has exhibited a range-bound to slightly declining trend over the past year, with a 1-year price change of +5.53% but a more recent pullback. As of August 14, 2026, the current price of $86.41 sits at approximately 85.5% of its 52-week range (low $78.97, high $101.04), indicating it is closer to the lower end of its yearly range. This positioning suggests the stock is trading near support levels, which could present a value opportunity if fundamentals hold, but also raises concerns about a potential breakdown if support fails.
Beta
0.58
0.58x market volatility
Max Drawdown
-16.9%
Largest decline past year
52-Week Range
$79-$101
Price range past year
Annual Return
+2.2%
Cumulative gain past year
| Period | SRE Return | S&P 500 |
|---|---|---|
| 1m | -10.9% | +2.5% |
| 3m | -10.7% | +2.7% |
| 6m | -11.4% | +11.1% |
| 1y | +2.2% | +20.5% |
| ytd | -7.6% | +12.3% |
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SRE Fundamental Analysis
Sempra's revenue trajectory has been mixed, with the most recent quarter (Q1 2026) reporting revenue of $3.655 billion, a year-over-year decline of -3.77% from $3.798 billion in Q1 2025. Over the past four quarters, revenue has fluctuated: Q2 2025 at $3.0 billion, Q3 2025 at $3.184 billion, Q4 2025 at $3.766 billion, and Q1 2026 at $3.655 billion, showing a slight deceleration in growth. The revenue segments indicate that the Utilities Service Line is the primary driver, contributing $3.238 billion, with Electricity at $1.235 billion and Natural Gas at $1.708 billion, while Energy-Related Businesses contribute only $0.19 billion, suggesting a heavy reliance on regulated utility operations.
Quarterly Revenue
$3.7B
2026-03
Revenue YoY Growth
-3.8%
YoY Comparison
Gross Margin
35.6%
Latest Quarter
Free Cash Flow
$-5.8B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is SRE Overvalued?
Given that Sempra's net income is positive (Q1 2026 net income of $1.15 billion), the primary valuation metric selected is the price-to-earnings (PE) ratio. The trailing PE is 32.11x, while the forward PE is 15.61x, indicating that the market expects significant earnings growth in the coming year, as the forward multiple is substantially lower. This gap implies that analysts anticipate a sharp increase in EPS, likely driven by the company's infrastructure investments and LNG expansion, which could justify the current valuation if realized.
PE
32.1x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 12x~28x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
13.7x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are significant. Sempra's negative free cash flow of -$5.8 billion TTM indicates heavy capital spending that exceeds operating cash flow, forcing reliance on debt or equity issuance. The debt-to-equity ratio of 1.15 and interest expense of $382 million in Q1 2026 (up from $370 million a year ago) expose the company to rising interest rates, which could compress margins and increase financial strain. Additionally, the payout ratio of 89.4% leaves minimal buffer for dividend coverage if earnings decline, as seen in Q3 2025 when EPS dropped to $0.12 due to a tax charge.