36 percent protection: RWE with a 22 percent chance

36 percent protection
RWE with a 22 percent chance

RWE’s stock is recommended as a buy by experts with high price targets due to the acquisition of an American solar company. Capped bonus certificates also allow investors to achieve high returns if 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 full phase-out of coal already planned for 2030 have given RWE’s share a significant boost in a friendly market environment in recent days.

RWE 39.09

If the positive expectations of the majority of experts who have the RWE share due to the acquisition of the American solar company, which is considered attractive with price targets of up to 60 euros (JP Morgan Chase), are fulfilled, then the share price should will at least be well supported in the future.

The investment idea

Investors who believe utility stocks will continue to rise as a result of the positive news situation may find it attractive to buy RWE shares, even at the current high levels. However, if you want to significantly reduce the undoubtedly existing price risk of direct stock purchases and still achieve double-digit returns, consider purchasing a capped bonus certificate as an alternative to stock buying.

Apart from dividend payments, the direct purchase of RWE shares will only produce a positive return if the share price rises. Capped and uncapped bonus certificates allow investors to achieve disproportionately high returns, not only when prices are rising, but also when prices are stagnant or falling.

The way it works

If the RWE share never touches or falls below the EUR 25 threshold on the certificate valuation date, the capped bonus certificate will be refunded on December 22, 2023 with the maximum redemption amount of EUR 50.

The most important data

The HVB bonus certificate with a limit (ISIN: DE000HB7YJF4) on the RWE share has a bonus level and a limit of EUR 50. The limit determines the maximum payout amount of the certificate. The barrier activated until the valuation date, December 15, 2023, is 25 euros. With the price of the RWE share of 38.93 euros, investors could buy the certificate for 41.12 euros.

Chance

Since the certificate can currently be purchased for EUR 41.12, it allows a gross return of 21.60 percent (= 18 percent per annum) until December 2023 if the share price never falls by 35.78 percent to EUR 25 or comes below.

The risks

If the price of the RWE share on the valuation day reaches the EUR 25 limit and the share is below the limit on the valuation day, investors will receive one RWE share for each certificate in their trading account. If this share is sold below EUR 41.12, the purchase price of the certificate, 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 accuracy of the information.

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