1. Vistra (NYSE:VST)
Number of Hedge Fund Holders: 93
Market Capitalization as of August 20: $28.27 Billion
Vistra (NYSE:VST) is involved in electricity generation, wholesale energy sales, commodity risk management, fuel production, and logistics. The company was founded in 1882 and sells electricity and natural gas to residential, commercial, and industrial customers. Vistra (NYSE:VST) operates battery energy storage facilities and a diversified energy portfolio that produces approximately 41,000 megawatts using natural gas, coal, nuclear, and solar.
For the quarter ended on June 30, Vistra (NYSE:VST) reported a mixed performance. The company reported a net income of $467 million, slightly lower than the $476 million recorded in the same period in 2023. However, the company’s ongoing operations net income, which reflects its core business activities, improved significantly, rising to $492 million from $409 million in 2023. Additionally, ongoing operations Adjusted EBITDA, a key measure of profitability, showed strong growth, increasing by 40% to $1.41 billion compared to $1.0 billion in the same period last year. This suggests that the company’s business performance has strengthened, despite the slight decline in overall net income.
Vistra’s (NYSE:VST) stock surged by almost 175% over the last 12 months. This remarkable growth can be attributed to the company’s strategic positioning in the energy market, driven by the growing demand for power, especially from AI and data centers. The company’s recent acquisition of Energy Harbor expanded its nuclear capabilities and has been a significant catalyst to position the company as a leader in clean and reliable energy. The company is expected to grow its earnings by 40% this year. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $110.26, which represents approximately 30% upside potential from its current level.
Vistra’s (NYSE:VST) involvement with AI goes beyond just supplying power, the company has also implemented AI technologies within its operations to enhance the efficiency of its power plants, improve thermal efficiency, and reduce carbon emissions. An example of this is the Heat Rate Optimizer (HRO), an AI initiative that has helped the company save millions in operational costs. This makes Vistra (NYSE:VST) an attractive choice for data centers that require reliable and clean energy sources.
In the second quarter 2024 investor letter, Legacy Ridge Capital stated the following remarks regarding Vistra (NYSE:VST):
“One of the sectors we know well which had been out of favor for several years has quickly come into favor: Independent Power Producers (IPPs). We’ve written consistently about NRG and Vistra Corp. (NYSE:VST) since the 2019 letter, have owned each, or both, since 2018, and invested a meaningful amount of our assets in VST specifically the past few years. Nate and I intend on spending more time in the year-end letter on our updated views on the IPPs and our learnings from the on-going investment, but we were a bit surprised how quickly the narrative around these companies changed. Our Blue Sky 2030 estimates of intrinsic value converged with the share price 6-years before we thought probable.”
Vistra’s (NYSE:VST) strategic investments in clean energy, its ability to leverage AI and capitalize on market dynamics present a compelling investment opportunity for investors looking to benefit from the ongoing energy transition. Vistra (NYSE:VST) has a market cap of $28.27 billion as of August 20. As of the second quarter, the stock is held by 93 hedge funds with stakes worth $4.03 billion. Lone Pine Capital is the largest shareholder in the company and has stocks worth $587.93 million as of June 30.
While we acknowledge the potential of Vistra (NYSE:VST) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an 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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