Constellation Energy Corporation (CEG): A Bull Case Theory

We came across a bullish thesis on Constellation Energy Corporation (CEG) on Value Investing Subreddit Page by jackandjillonthehill. In this article, we will summarize the bulls’ thesis on CEG. Constellation Energy Corporation (CEG)’s share was trading at $218.54 as of March 17^th. CEG’s trailing and forward P/E were 18.38 and 23.04 respectively according to Yahoo Finance.

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Constellation Energy (CEG) is a major nuclear power provider that has benefited from rising electricity prices and increasing demand for reliable baseload power. Initially, the stock was undervalued due to concerns about nuclear power’s variable margins, driven by high fixed costs and electricity price volatility. As AI-driven data centers required more consistent power, big tech companies signed long-term nuclear power contracts at above-market rates, pushing nuclear stocks higher. However, the introduction of Deepseek raised doubts about future electricity demand growth, leading to a selloff in nuclear stocks, including CEG. Despite this, electricity prices have continued to rise, fueled by increased demand and the implementation of “fast start pricing,” which ensures higher pricing for all electricity to maintain supply flexibility. For nuclear power, a stable baseload provider, this translates to higher margins. CEG’s operating margins have expanded from 10% to the high teens, with an impressive ROE of 30%, significantly outperforming traditional utilities that struggle to exceed 10% ROE. Yet, CEG trades at 18x trailing and 23x forward earnings, suggesting analysts expect margin compression—an assumption that may be overly conservative. Compared to Duke Energy and NextEra, which trade at 21x earnings with lower ROEs and higher debt, nuclear utilities appear undervalued following the Deepseek-driven selloff, creating a compelling investment opportunity.

Constellation Energy Corporation (CEG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 85 hedge fund portfolios held CEG at the end of the fourth quarter which was 78 in the previous quarter. While we acknowledge the risk and potential of CEG as an investment, our conviction lies in the belief that some 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 CEG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.