Zacks Investment Ideas Feature Highlights: Constellation Energy, Cameco and Vistra
Chicago, IL – September 26, 2024 – Zacks Investment Ideas feature highlights Constellation Energy (CEG), Cameco (CCJ) and Vistra (VST).
We’ve all grown accustomed to the positivity surrounding the artificial intelligence frenzy.
Of course, beloved Nvidia has been leading the charge, and several other large-cap technology companies are also set to benefit.
But for those looking for another angle, energy stocks with nuclear and uranium exposure – such as Constellation Energy, Cameco and Vistra – should be considered, given the vast amount of energy used within data centers. Let’s take a closer look at each.
Vistra
With an innovative, customer-centric approach, Vistra safely operates a reliable, efficient power generation fleet of natural gas, nuclear, coal, solar, and battery energy storage facilities. Shares have been scorching hot in 2024, gaining nearly 200% and seeing bullish action following the news mentioned above.
Notably, Vistra closed an acquisition of Energy Harbor earlier in 2024, which added more than 4,000 MW of nuclear generation to its portfolio alongside roughly one million retail customers. Further, the company inked two new power purchase agreements with both Amazon and Microsoft, adding to its already favorable stance.
In addition, the company plans to spend at least $2.25 billion on share repurchases throughout 2024 and 2025, which can help put in a floor for shares. The company has aggressively repurchased its shares, with 344 million shares outstanding (as of August 5), reflecting a 29% decline since November 2021.
Shares could also attract income-focused investors, with its current 14% five-year annualized dividend growth rate reflective of a shareholder-friendly nature.
Cameco
With assets on three continents, Cameco is one of the world’s largest uranium producers, positioning it nicely to reap the growing demand for nuclear energy. Though shares have underperformed on a YTD basis, the stock has climbed an impressive 10% just over the last month, with the move sparked by the headlines mentioned above.
Tim Gitzel, CEO, gave a rosy outlook for the company following its latest set of quarterly results, stating, “With full-cycle support emerging for nuclear energy, reinforced by positive public opinion, promising policy decisions, and market-based solutions, we believe we are in the unique position of utilizing that experience and understanding to provide reliable sources of supply to meet the durable, long-term demand emerging across the fuel cycle.”
The company’s Uranium segment delivered a nice performance throughout its latest period, with production volumes, sales volumes, and revenue in the segment all climbing by at least double-digit percentage rates year-over-year.
Cameco’s top line trend has been much more constructive over recent periods relative to previous years.
Constellation Energy
Constellation Energy shares melted higher following news last week that it would be restarting a nuclear plant in a deal with mega-cap technology giant Microsoft. Microsoft looks to purchase power from the plant to meet its data center needs, another theme we’ve all become familiar with.
“Powering industries critical to our nation’s global economic and technological competitiveness, including data centers, requires an abundance of energy that is carbon-free and reliable every hour of every day, and nuclear plants are the only energy sources that can consistently deliver on that promise,” said Joe Dominguez, CEO.
Up nearly 120% YTD, CEG shares have delivered a remarkable performance relative to the S&P 500’s 20% gain. The outlook for its current fiscal year remains constructive, with the $7.97 Zacks Consensus EPS estimate up 26% over the last year and suggesting 60% growth year-over-year.
Microsoft shares didn’t see much action following the news, not overly surprising. Perhaps to the surprise of some, MSFT shares have actually lagged relative to the S&P 500 in 2024, gaining 15%.
The artificial intelligence theme is undoubtedly here to stay for some time, with many different angles to play the frenzy.
And over recent weeks, the energy consumption side of the trade has gotten heavy attention, with all three related stocks above seeing their shares move higher.
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