Constellation Energy (CEG) PT Raised to $378 at Guggenheim amid Calpine deal

Guggenheim analyst Shahriar Pourreza raised the price target on Constellation Energy (NASDAQ: CEG) to $378.00 (from $328.00) while maintaining a Buy rating.

The analyst commented, "CEG’s surprise acquisition of CPN is a resource adequacy long call wrapped around potentially pivotal long-term contracting synergies. Specifically, while the deal is already stellar from a financial perspective, we believe the proforma platform will make CEG a truly national solutions package for hyperscalers – a strategic coup augmenting the existing valuation thesis (infra-esque cash flows), all at an attractive multiple. The deal is also, on its face, a resource adequacy call, validating our longheld view that gas assets have a strong scarcity value in both decarbonizing and load growth environments. The same theses that underpinned our Best Idea call for VST in 2024 are present here, with a highly attractive gas fleet positioned for decades of RA and energy margin capture – all at a sub-VST takeout multiple. Against all these tangible benefits, we believe the deal also relieves some of the NT pressure we have felt from investors – namely the will-they-or-won't-they waiting game for 1H25 colocation deals, with management now positioned for incremental catalysts through YE25. We had also entered the year with some concerns around the scarcity value of nuclear in light of recent gas deals, which this deal puts to rest. We are raising our PT from $328 to $378 as we incorporate CPN into our valuation and update our standalone assumptions– our PT implies a ~4% FCF yield or 16x EBITDA multiple. We have also included a full model for CPN within our CEG model for your reference/utilization – NewCo drives our valuation while our estimates will remain with OldCo until we get closer to deal closure. We also do provide proforma numbers for illustrative purposes, but we do admit the numbers can/will likely change materially as more inputs are disclosed as we get towards deal closure. We caught up with C-suite after the announcement."

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