Is Constellation Energy Stock a Buy Now?

Core Insights - Constellation Energy is positioned to meet the increasing energy demand from hyperscalers driven by artificial intelligence growth [1][2] - The company has established significant long-term agreements with major tech firms like Microsoft and Meta for clean energy supply [5][6] Company Overview - Constellation Energy operates a large nuclear fleet in the U.S., with 14 nuclear generating stations and a capacity of approximately 22 gigawatts (GW) [3] - The company achieves a nuclear capacity factor of 94.6%, outperforming the industry average by about four percentage points [4] Major Contracts and Revenue Visibility - Constellation secured a 20-year power purchase agreement with Microsoft, which includes the restart of the Three Mile Island Unit 1, expected to be operational by mid-2028 [5] - A similar 20-year agreement was signed with Meta, alongside over $1 billion in contracts from the U.S. General Services Administration, including an $840 million contract for 1 million megawatt-hours (MWhs) annually starting in 2025 [6] Expansion and Acquisition - The company plans to acquire Calpine Corporation for a net price of $26.6 billion, enhancing its portfolio with natural gas and geothermal assets [7][8] - This acquisition will add over 27 GW of generation capacity and diversify Constellation's energy sources, including nuclear, hydro, wind, and solar [8][10] Financial Projections - The acquisition is expected to increase adjusted operating earnings per share by over 20% in 2026 and contribute more than $2 billion in free cash flow annually [11] Market Position and Valuation - Constellation Energy's valuation is over 33.6 times earnings, reflecting a premium compared to peers, based on long-term electricity pricing and AI-driven demand assumptions [12] - The company's diverse renewable energy assets and expanded portfolio position it well to meet rising energy demands, making it an attractive long-term investment [13]