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10. Constellation Energy Corporation (NASDAQ:CEG)

Number of Hedge Fund Holders: 79

While Constellation is a high-quality beneficiary of rising power demand, one investment firm believes much of the opportunity is already reflected in the stock’s valuation. On June 18, Goldman Sachs initiated coverage on the stock with a Neutral rating and a price target of $305.

The firm noted how CEG is a high-quality Independent Power Producer (IPP), boasting the largest nuclear fleet per EPSA, with around 22 GW of capacity. It also has a strong balance sheet and an asset base well-positioned to monetize hyperscale power demand.

Regardless of these positive points, the firm believes they are already reflected in Constellation’s share price.

However, the stock already trades at a meaningful premium to the IPP peer group (~3 turns above VST on FY2 EV/EBITDA and at the lowest FCF yield in our coverage), which in our view fully reflects (1) the scarcity value of the nuclear fleet, (2) the optionality from incremental PPA signings, and (3) the anticipated Calpine synergies.

While the firm isn’t negative on CEG’s long term position, it does express its positive view on the power demand theme through Talen Energy, Vistra, and NRG Energy.

Constellation Energy Corporation (NASDAQ:CEG) is an energy provider specializing in clean, carbon-free energy solutions.