This post was originally published on this site
Constellation Energy (NASDAQ:CEG) has been downgraded to Neutral from Outperform at Credit Suisse, with analysts also cutting the firm’s price target on the stock to $83 from $91 per share.
The analysts tell clients in a research note that they are downgrading the stock following last week’s fourth-quarter earnings report, which “leaves risk/reward more balanced for shares amid a lower ongoing FCF outlook, mainly due to cost pressures and increases in nuclear fuel spending.”
“CEG introduced FY23 EBITDA guidance of $2,900-3,300Mn, along with a strong FY24 gross margin guidance of $8,950Mn, without assuming any production tax credit (PTC) value in ’24, but CapEx was also considerably higher,” explain analysts.
The analysts acknowledge that CEG is “thematically supported as the only public way to get exposure to US nuclear, with the PTC providing long-term visibility on cash flows.”
However, they believe the shares now look expensive at a single-digit FCF yield and that the stock will be “more susceptible to commodity volatility this year, lacking catalysts as investors wait for clarity on PTC applicability (YE23).”
On Tuesday, Constellation Energy shares declined almost 5% after BofA downgraded the stock to Neutral from Buy. The company also announced on the same day that it will invest $800 million in new equipment to increase the output of its Braidwood and Byron Generating Stations in Illinois by approximately 135 megawatts.
