On Tuesday, Evercore ISI initiated coverage on shares of Vistra Energy (NYSE:VST) with an Outperform rating and a price target of $202.00.
The research firm expects Vistra to continue its positive trajectory from 2024, with potential for increased earnings before interest, taxes, depreciation, and amortization (EBITDA) and cash flow. This optimism is partly based on anticipated higher power curves and the prospect of a significant power supply contract with a large customer in the later part of the year.
The analysts at Evercore ISI see a 6% free cash flow yield in their 2027 target price, which represents a 20% discount compared to the projected 5% for the S&P 500. They believe that Vistra Energy has considerable potential for EBITDA and cash flow growth, which could be further bolstered by favorable power curves and/or substantial customer load contracts.
According to the coverage, the attractiveness of Vistra Energy's risk/reward profile is evident, with the base case target price of $202 indicating a total return potential of 17%. The firm also outlined a bull case valuation of $242 and a bear case valuation of $146, suggesting a possible 40% upside versus a 16% downside.
Evercore ISI's base case for 2027 includes an EBITDA of $6.8 billion and free cash flow of $3.7 billion. The $202 target price is based on an average of enterprise value to EBITDA and free cash flow yield valuation methodologies. This comprehensive approach underscores the firm's confidence in Vistra Energy's financial prospects moving forward.
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