Is Itron Still a Buy for Long-Term Investors After a Major Fund's Stake Reduction?

The recent institutional sell-off in Itron (NASDAQ: ITRI) has sparked debate among investors about whether the move reflects a loss of confidence in the company's fundamentals or routine portfolio rebalancing. While funds like Balyasny Asset Management and Millennium Management reduced their stakes significantly in Q2 and Q3 2025, a closer look at Itron's financial performance and valuation metrics suggests the sell-off may present a buying opportunity for long-term investors.

Fundamental Strength: Margins, Cash Flow, and Strategic Positioning

Itron's Q3 2025 results underscore its operational resilience. Despite a 5% year-over-year revenue decline to $582 million, the company achieved a record gross margin of 37.7%, a 360-basis-point improvement driven by a favorable customer and product mix according to financial reports. Adjusted EBITDA rose 10% to $97 million, and free cash flow surged to $113 million, up $55 million from the prior year. These figures highlight Itron's ability to generate robust cash flow even amid strategic portfolio optimization initiatives.

The company's leadership in grid modernization and smart metering further strengthens its long-term outlook. As global energy systems transition toward digitalization, Itron's expertise in utility infrastructure positions it to benefit from secular trends. CEO Tom Deitrich emphasized this during the Q3 earnings call, noting that the company is "setting new records for margins, profitability, and free cash flow".

Valuation Metrics Suggest Undervaluation

Itron's stock appears undervalued relative to both its historical performance and industry peers. As of December 2025, the stock trades at a price-to-earnings (PE) ratio of 17.0x, significantly below the industry average of 24.6x and the broader peer group of 42.0x. A discounted cash flow (DCF) analysis suggests the stock is trading at a 47.9% discount to its intrinsic value of approximately $187.69 per share. Additionally, Itron's enterprise value-to-revenue (EV/Revenue) of 1.7x and EV/EBITDA of 11.9x are well below historical averages for the sector.

Analysts have also weighed in, with some projecting a 12-month price target of $140.20, implying potential upside from current levels. While the stock fell 20% following the Q3 earnings report-partly due to softer-than-expected guidance-this pullback has created an entry point for investors who believe in Itron's long-term cash flow trajectory.

Institutional Sell-Off: Rebalancing or Red Flag?

The sell-off by institutions like Balyasny and Millennium Management-both of which reduced their stakes by over 50% in Q2 2025-requires contextual analysis. These firms are known for their multi-strategy frameworks, which prioritize dynamic capital allocation and risk-adjusted returns. Balyasny, for instance, returned 15.3% year-to-date through November 2025 by reallocating capital across its 160 portfolio manager teams, while Millennium Management's 7.6% gains for 2025 reflect its focus on adaptive trading strategies.

The timing of the sell-off aligns with broader Q4 2025 market dynamics. For example, Itron's VP and CAO, David Marshall Wright, sold 104 shares to cover tax obligations related to restricted stock units-a personal transaction unrelated to institutional sentiment. Meanwhile, funds like Marshall Wace LLP and Qube Research & Technologies Ltd increased their stakes by 1,925.5% and 95.3%, respectively according to official announcements, indicating divergent views on the stock's potential.

Balancing Analyst Caution with Long-Term Potential

Analysts have tempered enthusiasm with caution. Wall Street Zen and Baird downgraded Itron to "Hold" in late 2025, citing concerns about near-term guidance and competitive pressures. However, these downgrades occurred despite Q3 earnings that exceeded estimates and a strategic acquisition to bolster Itron's capabilities. The mixed signals-strong fundamentals against softer guidance-reflect the tension between short-term volatility and long-term growth.

For long-term investors, the key question is whether the sell-off is a reaction to temporary headwinds or a mispricing of Itron's intrinsic value. Given the company's improving margins, robust free cash flow, and strategic positioning in a high-growth sector, the institutional sell-off appears more aligned with portfolio rebalancing than a fundamental reassessment.

Conclusion: A Case for Strategic Entry

While the recent institutional sell-off has rattled investor sentiment, Itron's financial performance and valuation metrics paint a compelling case for long-term investors. The company's ability to generate strong cash flow, coupled with its leadership in grid modernization, suggests the sell-off is an overreaction to near-term noise rather than a sign of declining fundamentals. For those with a multi-year horizon, the current pullback offers an opportunity to acquire shares at a discount to intrinsic value.

As always, investors should conduct due diligence and consider macroeconomic risks, but the fundamentals remain firmly in Itron's favor.