Constellation Energy Group (CEG -0.62%) stock jumped 4.8% through 10:50 a.m. ET this morning, and it's not hard to figure out why.
Last night, Oracle reported an earnings miss -- but strong guidance -- that's sending that stock up more than 40% this morning. Investors are making the leap from Oracle, which is getting deeply involved in artificial intelligence (AI), to Constellation Energy, which provides power to AI data centers -- and deciding that if Oracle's a buy, then Constellation Energy stock must be, too.
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What Oracle said last night
Oracle actually missed on its earnings report last night, reporting a $1.47-per-share profit when analysts wanted to see $1.48 -- but no matter. Today all investors are talking about is Oracle CEO Safra Catz's prediction that "Oracle Cloud Infrastructure revenue [will] grow 77% to $18 billion this fiscal year -- and then increase to $32 billion, $73 billion, $114 billion, and $144 billion over the subsequent four years."
That's about 14-fold growth over a five-year time span, all fueled by demand for AI services from Oracle, and all contributing to demand for electricity to keep the AI momentum going. Investors are extrapolating from this thesis that demand for nuclear power from Constellation Energy must grow in tandem with demand for AI services from Oracle.
Is Constellation Energy stock a buy?
This, in a nutshell, is why investors are buying Constellation Energy stock this morning, but here's the thing:
Oracle's CEO may be promising 14-fold growth in five years, but analysts polled by S&P Global Market Intelligence don't expect Constellation to grow much faster than 14% annually over that time period. At 32.5 times earnings, that means Constellation stock has a price/earnings-to-growth (PEG) ratio of 2.3.
That's too rich for my blood. Constellation stock is a sell.
