Shares in retail electricity and energy generation company Vistra (NYSE: VST) rose as much as 38.8% in September, according to data from S&P Global Market Intelligence. The move is somewhat unusual in that much of it stems from an announcement at another company. Here’s the lowdown.
Vistra shares rise in sympathy
The Vistra pear I am referring to is Constellation Energywhose shares rose 32.2% in September. This was primarily due to Constellation announcing a twenty-year power purchase agreement with Constellation Microsoft to power its data centers with energy from Constellation’s Three Mile Island nuclear power plant.
According to a Reuters article, Microsoft reportedly agreed to pay up to $115 per megawatt hour (MWh) as part of the deal. That figure is significant because, as previously discussed, it is well above the total realized price of $51.2 MWh that Vistra received in the most recent quarter.
To be clear, Vistra currently generates 41,000 megawatts (MW) of power from various sources, including 24,000 megawatts (MW) from natural gas. Still, the market has become excited about the 6,400 MW of nuclear power and having recently acquired 4,000 MW of that nuclear capacity through the purchase of Energy Harbor in March.
In addition, Vistra announced in September that it would buy the remaining 15% of Vistra Vision, which it did not own. Vistra Vision is Vistra’s subsidiary that houses its nuclear generation, renewable energy and energy storage activities. The acquisition will increase Vistra’s exposure to nuclear and clean energy electricity.
What’s next for Vistra?
The leading providers of cloud services, Amazon Web services, Microsoft Azure and Alphabet‘s Google Cloud must guarantee long-term access to energy to support the growing demand for artificial intelligence (AI) applications. Therefore, it is believed that Microsoft has agreed to a price with Constellation that is significantly higher than current spot electricity prices. Investors in Vistra hope their company can make similar deals in the future.
If we look at traditional metrics such as price-to-earnings ratio, Vistra stock will look expensive. However, all it takes is one or two big long-term deals, and Wall Street analysts will be scrambling to improve their models and long-term earnings and cash flow forecasts.
The latter is key to the stock’s investment scenario, and if the AI revolution turns into an evolution, this could easily happen.
Should you invest €1,000 in Vistra now?
Before you buy shares in Vistra, consider the following:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Vistra wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $728,325!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns September 30, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Lee Samaha has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon, Constellation Energy and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Here’s why this stock rose 38.8% in September, making it the best-performing S&P 500 in 2024. Originally published by The Motley Fool
