Mackenzie Tatananni

While Constellation Energy's landmark power-purchase agreement with Meta Platforms could herald a "new contracting age," some on Wall Street are choosing to remain sidelined as they wait to see how future deals will take shape.

Citi Research analysts fine-tuned their expectations on Wednesday after shares rallied, then reversed course in the previous session. Analyst Ryan Levine downgraded Constellation stock to Hold from Buy while boosting his price target by nearly $100 to $318.

Shares were down 2.2% to $306.23 in premarket trading Wednesday while futures tracking the S&P 500 and Nasdaq Composite rose 0.2% each. But shares are still sitting on a year-to-date gain of about 40%; Constellation stock and peers have benefited from an improving outlook for nuclear energy.

Under the terms of the deal, Meta will buy energy from Constellation's Clinton Clean Energy Center starting in June 2027. The Clinton, Ill.-based plant was in danger of closing as its zero-emission credit was set to expire that same year. The agreement allows Constellation to apply for federal re-licensing and paves the way for upgrades that will expand the plant's power output.

As Meta and other hyperscalers continue to invest in artificial intelligence and seek solutions to its appetite for power, "we think there is a balanced risk to the upside and the downside," Levine wrote. He expects Constellation to pursue similar deals for other plants, as 70% of its fleet is set to expire by 2025. In his view, Constellation has the potential to contract up to 15.2 gigawatts of 22 gigawatts of existing capacity "at market-premium pricing."

While the Meta pact could pave the way for future gains for the nuclear sector, Levine considers Constellation a "high risk" investment due to its material exposure to power, gas, uranium, and oil prices, "which are inherently volatile and difficult to predict." Moreover, the clean-energy provider is subsidized by various state and federal credits for nuclear generation, "and could be subject to higher exposure to volatile returns if these subsidies roll off earlier than expected."

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com

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June 04, 2025 09:26 ET (13:26 GMT)

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