Constellation Energy (CEG) PT Raised to $313 at Morgan Stanley
Morgan Stanley analyst Dave Arcaro raised the price target on Constellation Energy (NASDAQ: CEG) to $313.00 (from $233.00) while maintaining a Overweight rating.
The report said, "MS Research Analyst Dave Arcaro highlights that on Friday CEG (OW) announced that it would restart the Crane Clean Energy Center (Formerly Three Mile Island), an 835 MW nuclear plant that previously closed in 2019. In conjunction, he adds that CEG signed a power purchase agreement with Microsoft (Covered by MS Research Analyst Keith Weiss, OW, $506 PT) for the plant's output. Dave estimates $1.70 in incremental annual EPS, ~$700m in EBITDA (including tax credits), ~$450m in free cash flow, at a capital cost of roughly ~$1-1.3b. He values the deal at $19/share. Dave estimates MSFT is paying ~$100/MWh to Constellation for the power from the plant, a roughly $50/MWh premium to the ~$45-55/MWh level in the market. MSFT was willing to pay $130/MWh (he would say a $50/MWh premium to the market) without any time to power advantage, so Dave thinks this signals that a behind-the-meter, collocated nuclear deal could be higher priced than he thought. Dave is increasing his CEG valuation and sees a positive readthrough to nuclear owners VST (OW) and PEG (OW), increasing PTs across the board. Dave is raising his CEG PT to $313 from $233 to incorporate $19/share value of the MSFT deal and $61/share higher value of future nuclear contracts assuming higher contract prices. For VST Dave is raising his PT to $132 from $110 to incorporate the higher nuclear contract price assumed for future deals. For PEG Dave is raising his PT to $95 from $83, with $8 attributable to the higher nuclear price and $4 for higher utility multiples vs. last month."