2. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 39
Average Upside Potential Based on Analyst Ratings: 17.38%
Average Price Target: $38.29
NRG Energy, Inc. (NYSE:NRG) is an integrated power company in the United States. It operates through Texas, East, and West segments. On March 2, NRG Energy, Inc. (NYSE:NRG) set the price for its offering of $740 million, 7.000% senior secured first lien notes due 2033 at 98.749% of their face value. In addition, the company has priced 650,000 shares of 10.25% series A fixed-rate reset cumulative redeemable perpetual preferred stock, with a $1,000 liquidation preference per share. The notes will reach maturity on March 15, 2033. NRG Energy, Inc. (NYSE:NRG) plans to use the net proceeds from these offerings to partially finance its previously announced acquisition of Vivint Smart Home.
On March 20, Julien Dumoulin-Smith, an analyst at Bank of America, upgraded NRG Energy, Inc. (NYSE:NRG) from Neutral to Buy with a price target of $36, up from $35. The company’s stock recently fell to a low not seen since November 2020 and is currently trading lower than it did immediately after the acquisition of Vivint. According to the firm, investors have failed to recognize the earnings potential of NRG Energy, Inc. (NYSE:NRG)’s nuclear and Texas-based retail business. The firm predicts that this business will generate approximately $1.4 billion in adjusted EBITDA by 2025 and noted that it is similar to peer Vistra’s “Vision” business, which is also a nuclear, gas, and retail powerhouse.
According to Insider Monkey’s fourth quarter database, 39 hedge funds were long NRG Energy, Inc. (NYSE:NRG), up from 27 funds in the earlier quarter. Richard S. Pzena’s Pzena Investment Management is the largest stakeholder of the company, with 8.35 million shares worth $265.7 million.
Legacy Ridge Capital made the following comment about NRG Energy, Inc. (NYSE:NRG) in its Q4 2022 investor letter:
“NRG Energy, Inc. (NYSE:NRG) was covered in the 2019 letter with VST. We sold the shares as COVID induced volatility presented better risk/reward opportunities, but never subsequently repurchased shares—as we did with VST. Not only do we think VST is a better value, but the management team at NRG appears to have gone astray. Despite coming to his position during an activist campaign by Elliott Management in 2017, when the prior empire-building CEO was shown the door, the replacement CEO has seemingly embarked on the same failed strategy. In early December they announced the purchase of Vivint Smart Home, a smart home platform company, for $2.8 billion. The transaction diversifies NRG’s business, increases leverage, dramatically reduces intermediate-term shareholder capital returns, and most importantly, is the opposite of what management told us they were going to do when they assumed the role in 2017. The stock fell 15% on the day of the announcement and is down another 5% since then, and now 10% lower than when we first wrote about it. We like the generation business at NRG and the valuation is almost back to interesting, but we’d probably have to see turnover in the C-suite and a refreshed corporate strategy to reignite our enthusiasm.”
