Please ensure Javascript is enabled for purposes of website accessibility

Why NextEra Energy Stock Rallied 12% in May

By Matthew DiLallo – Jun 4, 2020 at 11:54AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The electric utility stock bounced back last month.

What happened

Shares of NextEra Energy (NEE -2.91%) rose 12.6% in May, according to data provided by S&P Global Market Intelligence. A couple of factors powered the rally in the electric utility stock, including reports that it might bid on a rival utility.

So what

NextEra Energy's stock has been uncharacteristically volatile this year. Shares sold off in March and April as investors worried about how much the COVID-19 outbreak would impact demand for the energy it produces. As things turned out, it was immune, which was evident in the first-quarter results it reported in late April. That gave investors the confidence to buy shares.

A person in a suit with an outstretched hand that has a bright light and upward chart coming out of it.

Image source: Getty Images.

Another confidence booster is that NextEra might be able to take advantage of the economic downturn to enhance its operations and growth prospects. Analysts speculated that the company could use its top-notch balance sheet to acquire smaller rivals. Potential opportunities include renewable energy project developers as well as other utilities. One known acquisition target is Evergy (EVRG -4.32%). Bloomberg reported last month that the company plans to launch a formal sales process in June. NextEra has already hired advisors to prepare an offer for Evergy if it decides to sell.

Now what

Investors began piling back into NextEra's stock last month as concerns about the potential impact of the COVID-19 outbreak on its operations faded. Instead of feeling the effects, the company might benefit from the resulting market dislocation by taking advantage of opportunities to enhance its growth prospects. If it does, the company could grow its earnings and dividend faster than its current outlook.

Matthew DiLallo owns shares of NextEra Energy. The Motley Fool recommends NextEra Energy. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NextEra Energy, Inc. Stock Quote
NextEra Energy, Inc.
NEE
$79.97 (-2.91%) $-2.40
Westar Energy, Inc. Stock Quote
Westar Energy, Inc.
EVRG
$60.49 (-4.32%) $-2.73

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
342%
 
S&P 500 Returns
107%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.