1. Vistra Corp. (NYSE:VST)
Forward P/E as on March 4: ~18.2x
Number of Hedge Fund Holders: 120
Vistra Corp. (NYSE:VST) operates as an integrated retail electricity and power generation company. JPMorgan believes the company’s shares can be bought after the post-earnings selloff. The stock saw a strong decline due to the absence of a data center deal or forward guidance uplift. However, the fears are now overblown, says the JPMorgan analyst. Notably, the company’s stock has seen a decline of ~27.1% in just one month. As per the firm, Vistra Corp. (NYSE:VST) is in discussions with hyperscalers and data center developers. Also, BofA upgraded the company’s stock to “Buy” from “Neutral.”
As per the firm, the base business of baseload generation and competitive retail remains well-placed to see the benefits from tightening markets, enhancing demand and retail growth, irrespective of datacenter deals. The company has been growing its fleet of zero-carbon resources, advancing interests via cost-effective, strategic investments. During Q4 2024, Vistra Corp. (NYSE:VST) advanced its efforts in solar, energy storage, and nuclear by executing its renewable development pipeline, bringing online the first 2 projects that form part of its Illinois Coal to Solar & Energy Storage Initiative at Baldwin (70 MW) and Coffeen (46 MW).
Vistra Corp. (NYSE:VST) grew its ownership interest in nuclear by closing on an agreement for the acquisition of an entire 15% minority interest in its Vistra Vision subsidiary, making Vistra the sole owner of the highly valuable, carbon-free assets. Meridian Funds, managed by ArrowMark Partners, released its Q3 2024 investor letter. Here is what the fund said:
“Vistra Corp. (NYSE:VST) is an integrated retail electricity and power generation company, primarily serving Texas and the Midwest. We own Vistra because we expect power markets to continue tightening as baseload supply declines, coupled with rising demand from data centers, electric vehicles, and manufacturing reshoring. These factors create a favorable pricing environment for Vistra’s generation fleet, especially its nuclear and gas assets. The stock performed well during the period for three key reasons: tightening energy markets and strengthened pricing in forward-year energy contracts, the continuation of Vistra’s aggressive share repurchase program, and the company’s announced plan to acquire the remaining interest in Vistra Vision at an attractive valuation. Additionally, the company reaffirmed its 2024 guidance, indicating that results are trending toward the upper end of the previously projected range. We took advantage of the stock’s strength this quarter to trim our position.”
While we acknowledge the potential of VST as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than VST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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