GVC Gaesco adds Solaria, cuts France exposure

That constructive stance comes with a clear warning on France, which the firm again calls “the sick man of Europe” for equities. Paris’ 2027 budget plan, unveiled Thursday, extends by one year the extraordinary tax on large-company profits, though at a lower rate, and is expected to raise 5 billion euros next year versus about 7 billion euros in 2026.

For investors, the message is that fiscal pressure is becoming a stock-specific risk, not just a macro headline. GVC Gaesco removed Technip Energies and Eiffage from its European favorites and replaced them with Danone and STMicroelectronics, reflecting concern that higher taxes and a weaker public-finance backdrop could continue to weigh on French corporates.

The broker is also watching rising sovereign debt costs more closely, saying markets are increasingly discriminating between countries based on the sustainability of their public accounts. France and Britain are among the most penalized, while credit-insurance costs against a debt default are also climbing.

Inflation remains another complication. GVC Gaesco points to tensions in the Middle East keeping pressure on energy, transport and insurance costs, and notes that U.S. core personal consumption expenditures inflation reached 3.4% in August, with room for another uptick.

That backdrop leaves the Federal Reserve and the European Central Bank caught between easing too soon and staying tight too long. Both central banks have cooled expectations for near-term rate moves, but the broker says any renewed inflation flare-up could quickly change the market calculus.

In Spain, the biggest portfolio change is Solaria’s entry and Ebro Foods’ exit. GVC Gaesco says the renewable developer has become more attractive after its pullback from highs, driven by concern over tougher regulation on data centers and volatility in power prices.

The firm upgraded Solaria to buy from neutral and set a target of 21.5 euros, about 31% above the 16.4 euros cited in its report. Even excluding data-center business and other infrastructure income, it values the stock at 19 euros a share, and says the theoretical value would still be 17 euros even if no new capacity were added after 2027.

Ebro Foods leaves the list because higher transport costs could pressure near-term margins, even though GVC Gaesco still sees value in the company. Among its other Spanish picks, Cellnex stands out with the biggest implied upside at 82%, followed by Merlin Properties at 49%, Fluidra at 41% and Gestamp at 32%.

The broader narrative is a market still supported by earnings momentum, but increasingly shaped by taxes, debt and inflation. That keeps the focus on companies with visible profit growth and pricing power, while putting more pressure on indebted countries and firms exposed to higher fiscal or input-cost risk.