Constellation Energy Corporation (NASDAQ:CEG) is one of the AI Stocks Trending on Wall Street. On October 8, Seaport Global Securities analyst Angie Storozynski upgraded the stock to “Buy” from Neutral.
The company cited growing cash flows among independent thermal power producers (IPPs) and the company’s pending acquisition of Calpine behind the stock’s upgrade. He noted how thermal IPP cash flows are increasing “thanks to higher energy and capacity prices, lower interest rates and the absence of cash taxes.”
It also anticipates further DC power deal announcements, add-on M&A and positive earnings revisions for thermal IPPs before the end of 2025.
“We assume the merger with Calpine should close within the next 30 days, and given our updated estimates for CEG + Calpine and CEG’s relative underperformance versus its IPP peers over the past 12 months, we would like to lengthen CEG in its updated earnings update, especially if it coincided with another DC deal.”
“The Calpine merger will not qualify for additional depreciation under the OBBB, but maintenance and growth (nuclear restart plus ramp-up) capital spending by both companies along with nuclear fuel purchases should be enough to largely shield CEG’s growing EBITDA from cash taxes. Based on our updated pro forma Calpine estimates, CEG trades at 10.3x EV/EBITDA 2027 and a FCF yield 7.7% 2027. Multiples are still rich versus VST, CEG’s closest peer, but for good reason, given CEG’s size and its mix of nuclear and gas earnings. “We are watching regulatory reforms of the CA resource adequacy market, given the highly elevated RA prices in northern CA, but our model already reflects more moderate RA prices beyond 2027/2028.”
Constellation Energy Corporation (NASDAQ:CEG) is an energy provider specializing in clean, carbon-free energy solutions.
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