The RWE share is recommended as a buy by experts with high price targets because of the takeover of a US solar company. With bonus certificates with a cap, investors can also achieve high returns if the positive expectations are not fully met.
RWE’s €6.8 billion acquisition of Con Edison Clean Energy Businesses will give it a strong boost for its green expansion in the US, one of the fastest growing renewable energy markets. This positive company news and the complete phase-out of coal already planned for 2030 has given RWE shares a significant boost in the past few days in a friendly market environment.
If the positive expectations of the majority of the experts who have the RWE share because of the takeover of the US solar company, which is considered attractive with price targets of up to 60 euros (JP Morgan Chase), are fulfilled, then the share price should at least be well supported in the future.
The investment idea
Investors who believe that the utility share will continue to rise due to the positive news situation might find it attractive to buy RWE shares, even at the current high level. However, if you want to significantly reduce the undoubtedly existing price risk of direct share purchases and still want to achieve a return in the double-digit percentage range, you could consider purchasing a bonus certificate with a cap as an alternative to buying shares.
Apart from dividend payments, the direct purchase of RWE shares will only enable a positive return if the share price rises. With bonus certificates with and without a cap, investors can achieve disproportionately high returns not only when the share price rises, but also when prices are stagnating or falling.
The way it works
If the RWE share never touches or falls below the barrier of 25 euros by the valuation date of the certificate, then the bonus certificate with cap will be repaid on December 22, 2023 with the maximum repayment amount of 50 euros.
The key data
The HVB bonus certificate with a cap (ISIN: DE000HB7YJF4) on the RWE share has a bonus level and a cap of EUR 50. The cap defines the maximum payout amount of the certificate. The barrier activated until the valuation date, December 15, 2023, is 25 euros. With the RWE share price of EUR 38.93, investors could purchase the certificate for EUR 41.12.
The chance
Since the certificate can currently be purchased at EUR 41.12, it enables a gross return of 21.60 percent (=18 percent per year) until December 2023 if the share price never falls by 35.78 percent to EUR 25 or falls below.
The Risks
If the RWE share price touches the barrier of EUR 25 by the valuation date and the share is listed below the cap on the valuation date, investors will receive one RWE share for each certificate in their custody account. If this share is sold below EUR 41.12, the purchase price of the certificate, then the investment will cause a capital loss.
This article does not constitute a recommendation to buy or sell RWE shares or investment products based on RWE shares. No liability is accepted for the correctness of the data.
