The utilities sector, represented by the Utilities Select SPDR ETF New York Stock Exchange: Excelohas seen turmoil, retreating nearly 7% from its 52-week high since the beginning of December. This decline represents a sharp reversal from previous outperformance, as capital flows exited the sector. Over the past three months, the XLU ETF has reported net outflows of 6.28%, indicating a shift in investor sentiment.
Previously, the utility sector has benefited from tailwinds such as interest rate cuts by the Federal Reserve and rising energy demand due to increased reliance on electric vehicles. However, the return of nuclear power has played a large role in the sector’s recent momentum. With growing demand expected from artificial intelligence and data centers, nuclear power is positioned as a critical component of a clean energy future, attracting significant interest from investors.
Amid this wave of enthusiasm, many nuclear-focused stocks have soared to impressive levels. One notable company is Vistra New York Stock Exchange: FSTemerged as the best-performing stock in the S&P 500 by November. However, after the recent withdrawal, VST has ceded its position to Palantir Technologies New York Stock Exchange: Beltr. With Vistra and other major players declining alongside the broader sector, could this decline represent an opportunity for exposure to nuclear energy stocks? Let’s dive into the details.
Vistra Corp: A clear industry leader
Vistra today
(As of 12/16/2024 ET)
- 52 week range
- $37.38
▼
$168.67
- Dividend yield
- 0.61%
- P/E ratio
- 27.12
- Price target
- $149.10
Despite being down 14% from its 52-week high, Vistra is still one of the best-performing S&P 500 stocks year to date, with a notable 276% gain. The company is uniquely positioned to capitalize on AI-driven electricity demands, as it operates a generation capacity of 41,000 MW, including 6,400 MW of nuclear power. It also has the second-largest energy storage capacity in the United States, a critical asset for balancing energy supply and demand in the age of artificial intelligence.
Financially, Vistra looks attractively valued after its withdrawal. The stock is trading at a price-to-earnings (P/E) ratio of 27.4 and a forward price-to-earnings ratio of 20.8, which is close to benchmarks that could signal a bargain for value investors. The price-to-sales (P/S) ratio is 3.2, with expected earnings per share (EPS) growth of about 40% in 2024.
Latest earnings, reported in November, showed revenue estimates 25% ahead of $6.28 billion, though earnings per share narrowly beat analyst estimates by 3%. Year-over-year sales rose 53.9% in the last reported quarter and 54% in the third quarter of 2024. Notably, the company’s cash flow growth of 261% far exceeds the industry average of 6.3%. Historically, the annual cash flow growth rate of 17.8% over the past three to five years has exceeded the sector average of 6.1%.
From a technical perspective, Vistra stock is approaching a crucial support level near $140, coinciding with a rising 50-day simple moving average (SMA). This level can serve as a favorable risk-reward entry point for investors. However, if this support is broken amid continued sector weakness, the next important level is near $120. Analysts remain bullish on the stock, with all 10 Wall Street analysts covering the stock issuing a buy rating. The consensus price target indicates a modest 3% upside from current levels, reflecting confidence in the company’s potential even after its stellar performance in 2024.
Speculative bets on nuclear innovation
NuScale Energy Today
NewScale Power
(As of 12/16/2024 ET)
- 52 week range
- $1.88
▼
$32.30
- Price target
- $10.39
While Vistra offers stability and proven growth, smaller nuclear energy stocks have drawn attention for their groundbreaking innovations and speculative appeal.
Companies like NuScale Power Corporation New York Stock Exchange: SMROklo Company New York Stock Exchange: OCLONano Nuclear Energy Company. NASDAQ:NNE They push the limits of nuclear technology.
NuScale pioneers advanced small modular reactors (SMRs), providing a compact and scalable alternative to conventional reactors.
Oklo today
(As of 12/16/2024 ET)
- 52 week range
- $5.35
▼
$28.12
- Price target
- $10.00
Oklo focuses on fast fission reactors for clean energy, while Nano Nuclear specializes in microreactor technologies, including the ZEUS solid-state battery reactor.
These mid-cap companies are largely pre-revenue and rely heavily on raising additional capital to achieve operational goals.
As a result, its stock prices are significantly more volatile than established companies like Vistra.
Nanonuclear energy today
Nano nuclear energy
(As of 12/16/2024 ET)
- 52 week range
- $3.25
▼
$37.51
- Price target
- $58.00
All three have fallen more than 30% from their recent highs, reflecting the risks associated with their speculative nature.
These stocks can be attractive to investors willing to take on higher risks in exchange for potentially large rewards. However, it requires a long-term horizon and a strong tolerance for volatility.
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