Peabody Energy Corporation (BTU): A Bull Case Theory

We came across a bullish thesis on Peabody Energy Corporation (BTU) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on BTU. Peabody Energy Corporation (BTU)’s share was trading at $14.94 as of Feb 24^th. BTU’s trailing P/E was 5.47 according to Yahoo Finance.

Peabody Energy’s selloff following earnings reflects weak coking coal prices and skepticism toward its latest acquisition. The market, which often reacts impulsively, overlooks Peabody’s long-term value. Commodity prices are cyclical, and despite China’s stimulus, India’s growth, and an energy-friendly U.S. administration, coal prices remain near 52-week lows. While this isn’t a generational buying opportunity like 2021, Peabody’s current valuation suggests it could double over the next few years.

Management has defended its acquisition, arguing that top-tier coal assets rarely come to market. While some fear continued deals will delay shareholder returns, Peabody may not have another chance to secure such assets. The company is also exploring coal-powered electricity generation for data centers, as GE Vernova’s order book for natural gas turbines is full through 2030, limiting alternatives. If data center expansion continues, coal could unexpectedly benefit.

Despite prevailing skepticism, Peabody presents a strong investment opportunity. The stock is trading at a significant discount to its intrinsic value, and as market conditions stabilize, its potential for appreciation is substantial. With exposure to both thermal and metallurgical coal, coupled with strategic asset acquisitions, Peabody is well-positioned for sustained long-term growth.

Peabody Energy Corporation (BTU) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 41 hedge fund portfolios held BTU at the end of the third quarter which was 25 in the previous quarter. While we acknowledge the risk and potential of BTU 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 BTU 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.