Is Capital Power (TSX:CPX) Fully Valued On Its Meta Data Centre Agreement?
Meta data centre agreement reshapes the outlook for Capital Power stock
Capital Power (TSX:CPX) has attracted fresh investor attention after securing a long term Energy Supply Agreement with Meta Platforms Inc. to provide 250 megawatts for a planned Alberta data centre.
The contract, which is expected to begin supplying power in the back half of 2028, is structured to provide capacity and energy payments backed by Capital Power’s Alberta generation fleet and extends the company’s roster of long duration agreements.
See our latest analysis for Capital Power.
The Meta agreement lands at a time when momentum in Capital Power’s stock has been firm, with a year to date share price return of 22.97% and a 1 year total shareholder return of 31.79%, building on a 5 year total shareholder return of 136.88%.
If this kind of long term infrastructure theme interests you, it could be worth seeing what other power related opportunities are emerging through the 34 power grid technology and infrastructure stocks
Capital Power now has a high profile contract, a growing portfolio and a stock that has already moved hard this year. The next step is clear: are investors paying a fair price for that strength today?
Most Popular Narrative: 1% Undervalued
The most followed narrative currently pegs Capital Power’s fair value at CA$74.65 per share, only slightly above the last close of CA$74.10. This puts a lot of weight on how its cash flows and margins evolve from here.
In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 26.2x on those 2029 earnings, down from 506.5x today. This future PE is lower than the current PE for the CA Renewable Energy industry at 268.4x.
Want to see what earnings path and margin rebuild would need to sit behind that kind of reset in valuation multiples, and how tightly those forecasts are tied to projected revenue growth and profitability expectations over the rest of the decade? The narrative lays out the full blueprint.
Result: Fair Value of CA$74.65 (ABOUT RIGHT)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Capital Power’s narrative could still be tested if electricity demand or data center build outs are slower than expected, or if financing costs remain elevated for a longer period.
Find out about the key risks to this Capital Power narrative.
Next Steps
With Capital Power’s story showing both promise and pressure points, the key question is how you weigh each side and how soon you act on that view. It is therefore worth reviewing the 2 key rewards and 4 important warning signs
Looking for more investment ideas beyond Capital Power?
If Capital Power has sharpened your interest in long term themes, do not stop here. Broaden your watchlist and let fresh ideas challenge your thinking.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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