On Tuesday, Mizuho (NYSE:MFG) Securities adjusted its stock price target for Constellation Energy (NASDAQ:CEG), reducing it from $264.00 to $235.00 while maintaining a Neutral rating on the stock. The firm's analyst cited Constellation Energy's third-quarter earnings per share (EPS) of $2.74 and the company's confirmation of its expected 13% EPS compound annual growth rate through 2030.
The revision followed a recent development where the Federal Energy Regulatory Commission (FERC) rejected the TLN/AWS interconnection agreement. The analyst believes this decision will have a negative impact on Independent (LON:IOG) Power Producers (IPPs) with nuclear assets, as they were vying for physical Power Purchase Agreements (PPAs) and may now have to opt for virtual PPA models.
In September, Constellation Energy made a final investment decision (FID) to restart the Crane Energy facility, previously known as TMI, under a virtual PPA agreement with Microsoft (NASDAQ:MSFT), which includes busbar pricing. After this transaction, the significance of co-location for IPPs was considered to be diminished.
Looking forward, the analyst anticipates that generative AI and hyperscale customers will likely pursue virtual PPAs with renewable projects to secure lower prices. The estimated price difference between nuclear and new renewable energy projects is around $40 per megawatt-hour.
The new stock price target of $235 reflects a lower valuation multiple applied by Mizuho. Despite the reduced target, the firm maintains a balanced view of the risks and rewards associated with Constellation Energy's stock.
In other recent news, Constellation Energy Corporation exceeded third-quarter 2024 expectations with robust earnings results. The energy sector leader reported GAAP earnings of $3.82 per share and adjusted operating earnings of $2.74 per share. These strong results led Constellation to raise its full-year earnings guidance from $8.00 to a range of $8 to $8.40 per share.
In other developments, the company announced the anticipated restart of the Crane Clean Energy Center and the addition of 2,800 megawatts of renewable energy through commercial products CORe+ and CFE (EBR:CFEB) since 2020. Constellation Energy also expressed confidence in achieving a 13% compounded growth target through the end of the decade and plans to introduce 2,000 megawatts of new nuclear capacity by 2027.
However, there are concerns about timely decision-making from FERC and PJM which could impact data center growth. Despite these regulatory challenges, the company sees strong bipartisan support for nuclear energy driving continued growth. These are among the recent developments for Constellation Energy.
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