US water stocks no longer hot? Multiple stocks targeted by JP Morgan Chase downgrade.

Recently, Wells Fargo & Company released a report on the rating adjustments of US water stocks for 2025. Based on recent market dynamics, company updates, and macro environment changes, Wells Fargo & Company has lowered the target prices of several stocks. Specifically, Wells Fargo & Company has upgraded the rating of California Water Service Group (CWT.US) from "hold" to "buy" and lowered the target price from $56 to $52; American Water Works (AWK.US) has been upgraded from "sell" to "hold" with the target price lowered from $133 to $129; American States Water (AWR.US) has been downgraded from "hold" to "sell" with the target price lowered from $84 to $77; Essential Utilities (WTRG.US) has been downgraded from "buy" to "hold" with the target price lowered from $43 to $39; The rating for SJW Group (SJW.US) remains "hold" with the target price lowered from $61 to $53. Looking back at 2024, the US water industry faced many challenges. The median return rate for water companies was -12%, much lower than the regulated electricity and gas companies with a median return rate of about 16%. The rise in interest rates at the beginning of 2024, as well as recent concerns about long-term high interest rates, have brought headwinds to the high P/E ratio sub-sector of the water industry. In addition, the lack of artificial intelligence/data center business layout has also limited investor interest in this sector. Water stocks declined in 2024, while the P/E ratio of power stocks increased significantly (benefiting from the long-term strong trend in power demand/data centers), leading to a decrease in the premium of water stocks relative to power stocks from 50-55% at the beginning of 2024 to 15-20%, the lowest level since the end of 2017. The high growth rate of water companies (6-8%) was often cited as one of the reasons for the premium. Now, this advantage has been offset. Most power companies have similar growth prospects in the next decade.