Starting the lightning round on October 2, a caller mentioned to Jim Cramer that he had recommended Quanta Services, Inc. (NYSE:PWR) six months ago, noting that the stock is currently down 15% from its 52-week high, and asked if it remains a buy. Mad Money host replied:
I still think it is… I think that there is still a buildout. Right now, because of the election, it looks like things aren’t going to go well. I think when that’s over, you’re going to see more building going on. I like PWR.
Cramer’s conviction in Quanta Services was also on display in his April 30 stock roundup, when a nearly 16% surge led him to a bigger point about the data-center boom.
Infrastructure Demand Is Showing Up in Orders
Quanta Services, Inc. ended June with a record $53.4 billion backlog, compared with $35.8 billion a year earlier. Remaining performance obligations reached $33.6 billion. The company’s expanding workload supports Cramer’s view that infrastructure construction still has room to grow. Second-quarter revenue increased to $9.56 billion from $6.77 billion, while adjusted diluted EPS rose to $4.24 from $2.48. The company also generated approximately $900 million in quarterly free cash flow. Management raised its full-year adjusted EPS outlook to between $16.45 and $16.95, reflecting stronger results and acquisition contributions.
Quanta Services made our list of 10 Fastest-Growing Grid Construction Stocks to Buy Now, but a few stocks ranked higher. See which stock claimed the #1 spot—and how the rankings were determined.
A Large Workload Comes With High Expectations
Backlog does not represent guaranteed near-term revenue. Quanta’s calculation includes estimated orders and renewals under master service agreements, along with firmer contractual commitments. The company warns that cancellations, permitting requirements, weather and other delays can change when revenue is recognized. Investors should distinguish its headline backlog from remaining performance obligations.
The shares also remain substantially more expensive than several related infrastructure contractors. Data shows Quanta Services, Inc. at approximately 37.1x forward earnings, compared with 23.9x for EMCOR Group and 21.33x for MasTec. The businesses have different project mixes, but the gap shows that Quanta’s anticipated growth already carries a considerable premium. A decline from the stock’s high does not erase that premium. Continued earnings growth could support it, while slower project conversion or disappointing profitability would leave less room for error.
Quanta Services is benefiting from the AI power buildout, but its biggest advantage may not be where investors expect. One detail about the company’s role in these projects could matter more than it first appears.
Institutional Participation Continues to Broaden
The number of hedge funds holding Quanta Services, Inc. increased to 100 in Q2 from 94 in Q1, according to Insider Monkey. While Peconic Partners LLC was the largest hedge fund holder of the stock with 4.72 million shares, it is worth noting that Citadel Investment Group increased its holdings by a staggering 614% to 632,022 shares. Short interest stood at 2.40% of the public float.
Quanta has substantial work ahead of it, giving Cramer’s optimism an operating basis beyond his election outlook. For shareholders, the harder issue is the price paid for that growth. The recent pullback offers a lower entry point, but the stock still asks the company to deliver considerably more than its peers.
While we acknowledge the risk and potential of PWR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PWR that has 10,000% upside potential, check out our report about this cheapest AI stock.
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