Peabody Energy Corporation (BTU): A Bull Case Theory

Core Thesis - Peabody Energy Corporation (BTU) presents a bullish investment case driven by undervalued core operations, critical minerals optionality, and a cyclical rebound in coal demand linked to AI-driven power needs [3][7] Financial Metrics - As of January 30th, BTU's share was trading at $35.26, with trailing and forward P/E ratios of 26.89 and 25.19 respectively [1] - The core business is expected to generate approximately $900 million of EBITDA by FY27, implying an equity value of around $30–35 per share [4] Coal Business Valuation - The Centurion metallurgical coal project is valued at approximately $1.5 billion, supported by peer transactions and prior third-party interest [3] - Management believes potential liabilities related to the Anglo transaction are manageable and will not materially affect earnings power [4] Critical Minerals Exposure - BTU has identified significant concentrations of rare earth elements and critical minerals within its Powder River Basin mines, which are a priority for the U.S. Department of Energy [5] - Management claims these concentrations are competitive with peers, positioning BTU as a favored domestic supplier with potential value estimated at roughly $25 per share [6] Market Dynamics - AI-driven electricity demand is increasing coal generation and improving plant utilization, with delays in gas-fired capacity leading to greater reliance on coal [7] - Higher natural gas prices and urgent power needs make Powder River Basin coal a cost-effective solution, potentially driving an additional ~$700 million of EBITDA and ~$25 per share in value [7]