Could Buying Constellation Energy Today Set You Up for Life?
Key Points
Constellation’s stock has skyrocketed since its public debut.
It has plenty of irons in the fire, and it still looks reasonably valued.
Constellation Energy (NASDAQ: CEG), one of the largest independent power producers in the U.S., was spun off from Exelon (NASDAQ: EXC) in an IPO on Feb. 2, 2022. It opened at $50.04 per share, but it now trades at about $255. Let's see why Constellation became a multibagger stock -- and if buying it today will still set you up for life over the next few decades.
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Why did Constellation's stock soar?
Constellation operates nuclear, natural gas, oil, geothermal, hydro, wind, and solar facilities with a total capacity of 55 GW. Its nuclear fleet, the largest in the United States, accounts for 22 GW of that total and fuels most of its profit growth.
It already serves 80% of the Fortune 100, and it's benefiting from the rapid expansion of the power-hungry cloud and AI markets. Moreover, the Zero-Emission Nuclear Production Tax Credit (PTC), established under the Inflation Reduction Act of 2022, subsidizes its business if energy prices are too low -- but amplifies its gains when energy prices rise.
From 2025 to 2028, analysts expect Constellation's EPS to grow at a 31% CAGR as it scales its power purchasing agreements (PPAs) with the top hyperscalers and enterprise companies, increases the capacity of its existing plants, and integrates its recent acquisition of Calpine. It still looks reasonably valued at 20 times next year's earnings, and it could be a great stock to buy, hold, and forget if you expect the global demand for electricity to keep rising.
Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Constellation Energy. The Motley Fool has a disclosure policy.