A Texas-based power company that joined the S&P 500 just two months ago has become the index’s third-best performing stock this year, fueled by the same demand for everything related to artificial intelligence. Vistra Corp., based in Irving, Texas, just outside Dallas, was added to the benchmark stock index in May, a short distance from the company joined by Texas Utilities Co. and Dynegy Inc. The electric utilities formed last fall, just months after joining the S&P MidCap 400 Index. Fast forward to today, and Vistra shares have soared 139% this year, adding $18.5 billion to its market value, now totaling $32 billion, according to FactSet data. It trails only AMD and Nvidia, two heavyweights driving the artificial intelligence revolution through their servers and chips. Vistra attributed its bullish position to the energy crunch facing the U.S. as data centers use more electricity to power artificial intelligence, the “reshoring” of manufacturing to the U.S. and the increasing electrification of industry and vehicles. “We’re always surprised when you see movement of the magnitude that we’ve seen, but I Think it’s a long time coming. “For seven years we have been developing our company with the theme of electrification in mind. ” Vistra suddenly caught the attention of investors when it joined S&P,” Burke said. “People came to Vistra and they said, ‘I need a big data center, I need power, I need power quickly,’ ” Burke said. “Because we are a competitive company, we can move quickly. So we are having a lot of conversations with all of these largest customers.” The VST YTD Series Vistra will be available in 2024. Shahriar Pourreza, senior managing director of North American Power and Utilities, said one of the best ways to profit from growing electricity demand is to hold independent power producers such as Vistra because, unlike regulated utilities, , the company is able to dispatch power based on economic conditions. Vistra also owns nuclear power plants, which are among the most in-demand energy sources on the market in 2024 because the reactors do not burn fossil fuels and emit no greenhouse gases. The company completed the acquisition of two nuclear power plants in Ohio and one in Pennsylvania through its $3.4 billion acquisition of Energy Harbor in March. Pourreza said it is expected that data centers will want to contract power directly with nuclear power plants because they provide reliable, carbon-free power around the clock. According to its fourth quarter 2023 financial report, Vistra’s baseload power generation is 58% natural gas, 20% coal, 15% nuclear, 6% renewable energy and 1% oil. “For Vistras, that means they’re going to sell power to the data center at a price above the market price, which is significantly above the current curve,” Guggenheim analyst Pourreza told CNBC. “Then it Not only will the power be sold at above-market prices, but it will also be sold through long-term contracts,” Pourreza said. Vistra will benefit not only from a premium but also from the cash flow certainty of a strong counterparty. Guggenheim has a buy rating on Vistra stock with a price target of $133, which represents a 44% upside from Wednesday’s closing price of $92.31. Wall Street is also generally bullish on Vistra, with 85% of 13 analysts covering the company giving it the equivalent of a buy rating, according to FactSet data. Analysts’ average price target is $117 per share, an increase of 26% from the previous closing price. Although Vistra has yet to announce deals with data center operators, the technology industry desperately needs power from existing U.S. nuclear power plants. data center. The cloud services giant is also in talks with Constellation Energy Corp. about powering a nuclear power plant on the East Coast, people familiar with the matter recently told The Wall Street Journal. Gold rush “The gold rush has begun,” Mark Nelson, founder of Radiant Energy Group, said on CNBC’s “The Last Call” in June. “Existing nuclear power plants are the hottest power projects right now. They can almost tell the price of building a data center parked at the door.” Constellation, the largest operator of nuclear power plants in the United States, has gained 87% this year and is the best performer in the S&P 500. Four best stocks, second only to Vistra. Chief Executive Joseph Dominguez told analysts on Constellation’s first-quarter earnings call that the company is more interested in nuclear energy than natural gas “because generally speaking, the customers we deal with are not interested in: [gas] Guggenheim has a buy rating on Constellation and a price target of $242, which would imply a 10% upside from Wednesday’s closing price of $219.55 per share. Tech companies are focused on carbon-free energy to meet their climate goals, but Vistra’s massive natural gas assets in Texas are also coveted for natural gas. Sell debt or equity and instead buy back stock, generate positive cash flow, and have credit metrics that are “essentially in investment-grade territory,” Pourreza said. Standard & Poor’s rates Vistra a BB and completes the Energy After the Hong Kong trade, its outlook was revised to positive.
