Constellation Energy secured a major order from Meta but was downgraded by Citigroup to "Neutral."
Citigroup downgraded Constellation Energy's rating from "Buy" to "Neutral," citing recent stock price increases and the power purchase agreement with Meta limiting short-term upside potential. Analyst Ryan Levine noted that the power purchase agreement adds approximately $12 per share in value but fails to significantly enhance the premium for low-carbon nuclear energy. Although the deal has broad implications for the power market, most of the gains have already been reflected in the stock price, and there are risks such as power price volatility and policy uncertainty
According to the Zhitong Finance APP, Citigroup has downgraded the rating of Constellation Energy (CEG.US) from "Buy" to "Neutral," citing limited short-term upside potential due to the recent rise in the company's stock price and the power purchase agreement reached with Meta.
Citigroup analyst Ryan Levine estimates that the price of the 20-year power purchase agreement starting in 2027 will be between $70 and $95 per megawatt-hour. Compared to the situation without an agreement, this adds about $12 in value per share, but the analyst stated that this does not provide a significant premium for low-carbon nuclear energy.
Levine wrote, "This deal has broad implications for the power market as it signals some future trading activities." However, he believes that most of the benefits from such agreements have already been reflected in Constellation Energy's stock price, which has significantly risen since Citigroup upgraded its rating in April.
Levine noted that approximately 70% of Constellation Energy's existing nuclear power plants with expiring licenses before 2045 could secure similar data center collaboration agreements at a price of $80 per megawatt-hour, but he believes the company's stock carries a "balance of both upside and downside risks," and thus maintains a high-risk rating due to fluctuations in electricity prices, policy uncertainties, and execution challenges related to the restart of nuclear power plants
