On Wednesday, RBC Capital Markets highlighted shares of AES (NYSE:AES) Corp and Brookfield Renewable Partners (NYSE:BEP) as their preferred stocks within the renewable independent power producers (IPPs) sector. Shelby Tucker, an analyst at RBC Capital, cited the companies' significant exposure to renewables and their leading roles in corporate data center power purchase agreements (PPAs) as the primary reasons for their selection.
AES and BEP stand out in the renewable IPP landscape, according to RBC Capital, due to their heightened focus on renewable energy sources. The firm believes these companies are well-positioned to benefit from the growing demand for carbon-free electricity, particularly from data centers, which are increasingly seeking sustainable energy solutions.
The analyst also noted that traditional utilities like Dominion Energy (NYSE:D), Southern Company (NYSE:SO), and American Electric Power (NASDAQ:AEP) are highly involved in data center development. This involvement positions them to capitalize on the sector's expansion. RBC Capital suggests that these utilities are among those most exposed to the opportunities arising from increased data center demand.
Furthermore, RBC Capital identified Xcel Energy (NASDAQ:XEL), Duke Energy (NYSE:DUK), Pinnacle West Capital (NYSE:PNW), and Entergy (ETR) as additional stocks offering exposure to the burgeoning data center markets. Entergy, with a market capitalization of $32.5 billion, has demonstrated remarkable performance with a 55% return year-to-date.
According to InvestingPro, the company maintains a "GOOD" overall financial health score and has consistently paid dividends for 37 consecutive years, currently yielding 3.17%. These companies are viewed as alternative options for investors looking to gain from the growth in data centers, which require a reliable and often green power supply.
The analyst's comments underscore the potential for utilities and renewable IPPs to benefit from the dual trends of rising power prices and the growing demand for data center capacity. Companies with a clear strategy for engaging with these markets may offer attractive opportunities for investors interested in the intersection of technology and renewable energy.
Based on InvestingPro's Fair Value analysis, Entergy appears slightly overvalued at current levels. Investors can access detailed valuation metrics, 10+ additional ProTips, and comprehensive research reports for ETR and 1,400+ other US stocks through an InvestingPro subscription.
In other recent news, Entergy Corporation (NYSE:ETR) has been the subject of several significant developments. The company reported robust financial results in its third-quarter earnings conference, delivering an adjusted earnings per share (EPS) of $2.99. This strong performance led to an upward revision of the lower end of Entergy's guidance range.
The company has also announced plans to accelerate its capital investment plan, with an additional $7 billion targeted toward renewable energy and transmission projects.
KeyBanc Capital Markets downgraded Entergy's stock from Overweight to Sector Weight due to valuation concerns, despite acknowledging the company's strong performance. On the other hand, BMO Capital adjusted its stock price target for Entergy, reducing it to $159 from $166, but maintained an Outperform rating.
BofA Securities also adjusted its stance on Entergy, moving its rating to Neutral from Buy, but increased the price target for Entergy's shares to $154 from the previous $138.
Entergy's revised business plan includes a 21% increase in capital spending, higher earnings per share (EPS) guidance, and an elevated EPS growth rate of 8%-9% from 2026 to 2028. The company is also exploring the development of nuclear units and has announced a stock split slated for early December. These are some of the recent developments in the company's operations.
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