Constellation Energy (CEG +6.25%) stock, one of the nation's biggest producers of electricity from nuclear power, gained 4% through 10:55 a.m. ET Friday on two positive news items.
Last night, investment banker TD Cowen initiated coverage of Constellation stock with a buy rating and a $440 price target. (Constellation stock costs only $335 and change, implying about a 31% price rise over the next 12 months.)
Separately, this morning, social media giant Meta (META +1.15%) announced "landmark agreements that will extend and expand the operation of three nuclear power plants, boost the development of new advanced nuclear technology, and foster job growth in several American communities."
Image source: Getty Images.
The Meta news
Let's cover that second item first. Meta signed up Constellation to supply it with power last year. Now it's adding Vistra (VST +10.47%), Oklo (OKLO +7.90%), and privately held TerraPower to its mix of suppliers as well. In its statement, Meta said this makes it "one of the most significant corporate purchasers of nuclear energy in American history."
While the announcement doesn't imply any new business going to Constellation, it does confirm Meta's interest in and commitment to nuclear energy. That alone helps to secure Constellation's future revenue stream.
Moreover, Cowen calls Constellation stock "a compelling opportunity" and predicts it will continue to sign new deals through 2026, "above forward curve prices." Revenue from natural gas sales adds "intriguing upside potential" to the nuclear power thesis, according to Cowen.
NASDAQ: CEG
Key Data Points
Is Constellation stock a buy?
Constellation stock is not without risk, however. Priced at 37 times trailing earnings, Constellation stock looks expensive relative to forecasts for only 15% long-term earnings growth. The company is also burning cash and pays a miserly 0.5% dividend yield.
All things considered, you can probably find better places to invest your money than Constellation stock.
