On Monday, Mizuho (NYSE:MFG) Securities adjusted its price target for Constellation Energy (NASDAQ:CEG) shares, raising it from $235.00 to $307.00, while maintaining a Neutral stock rating. The stock, currently trading near $305, has shown remarkable momentum with a 172% return over the past year.
According to InvestingPro analysis, the company appears to be trading above its Fair Value. This change follows Constellation Energy's announcement that it plans to acquire Calpine Corporation, a gas and renewable independent power producer (IPP), from Energy Capital Partners (WA:CPAP) in a deal involving both cash and stock.
The acquisition is set to significantly expand Constellation Energy's generation portfolio by adding 121 terawatt-hours (TWhs), as well as 59 TWhs of retail contracts. This move is expected to position the combined entity as the leading generator and retail supplier of electricity in the United States.
Mizuho analysts anticipate that the transaction will lead to a 20% accretion, which translates to an increase of approximately $2 per share in 2026, following the completion of the deal. The expected pro forma leverage is approximately 2.9 times adjusted EBITDA in the year 2026.
Constellation Energy aims to finalize the acquisition by the end of 2025, subject to regulatory approvals. Mizuho’s updated price target reflects the strong potential accretion from the Calpine portfolio. Despite the positive outlook on the transaction, Mizuho maintains a Neutral stance on Constellation Energy stock, suggesting that the current share price adequately reflects the potential risks and rewards.
The firm also notes the significant 60% IPP premium, which indicates Constellation Energy's capacity for long-term contracting of its generation capabilities.
In other recent news, Constellation Energy has been making significant strides in its financial and operational endeavors.
BofA Securities recently raised the energy company's stock price target to $308, reflecting strong confidence in its growth potential. The company also reported robust third-quarter earnings, surpassing expectations with GAAP earnings of $3.82 per share and adjusted operating earnings of $2.74 per share.
Further supporting its financial stability, Constellation Energy secured significant contracts with the U.S. Government to supply over one million megawatt-hours annually to more than 13 government agencies. These strategic agreements are estimated to be worth around $840 million, solidifying the company's revenue stream for the next decade.
In terms of regulatory developments, Constellation Energy's potential transaction is expected to undergo scrutiny by the Federal Energy Regulatory Commission, the Department of Justice, and Public Utility Commissions. To address possible concerns, the company indicated a willingness to conduct a limited sale of its PJM assets.
On the analyst front, BMO Capital Markets maintained an Outperform rating, BofA Securities upgraded the stock from Neutral to Buy, Jefferies reaffirmed its Hold rating, and KeyBanc maintained their Overweight rating.
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