– Constellation Energy, a recent spinoff, operates 13 nuclear power plants in the US.
– As of the Inflation Reduction Act’s (IRA) subsidies, CEG thus offers a minimum FCF yield of around 8.5% while allowing for full upside potential at higher power prices.
– Furthermore, the downside looks somewhat protected as the company trades at <50% below replacement cost.
– The stock offers additional optionality if the company takes advantage of IRA-supported tax-credit opportunities in clean hydrogen.
– 12-13x EBITDA multiple on floor earnings implies a $115-125/share stock price.
Exp. gain: 47-60%
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