Constellation started with Buy at Goldman on strong clean energy profile
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Constellation Energy (CEG
+2.8%) pops after Goldman Sachs initiates coverage with a Buy rating and a $62 price target for the energy company recently spun off from Exelon.
"We view the company as a large cap, clean energy related, strong free cash flow and capital allocation story," Goldman analyst Michael Lapides writes, according to Barron's, seeing Constellation as well situated to reap benefits from the transition to clean energy, especially since it operates one of the largest nuclear fleets in the U.S.
Constellation receives $1.8B in annual tax credits for its plants in New York, New Jersey and Illinois, which comprises ~30% of its total revenue in 2023, Lapides calculates, with potentially more on the way if additional states or the federal government impose a tax credit.
Also, "higher natural gas prices are largely beneficial for CEG as it runs a mostly nuclear fleet and therefore benefits more from the uplift in power prices and does not see a meaningful impact on the cost side when natural gas prices increase," the analyst says.
Seeing Constellation as "uniquely positioned to capitalize on the long-term trend towards decarbonization" as the largest nuclear owner in the U.S., Wells Fargo's Neil Kalton also started coverage with a Buy rating.