Morgan Stanley sees upside for CEG, other stocks after nuclear restart

Constellation Energy stock is still rising after the power company’s landmark announcement last week that it plans to restart the Three Mile Island nuclear plant in Pennsylvania. Constellation jumped as much as 6.6% early Monday after soaring 22% on Friday. Morgan Stanley analysts led by David Arcaro see continued upside for Constellation, raising their price target to $313, implying a return of nearly 23% over Friday’s close of $254.98. Morgan Stanley estimates that just the Unit 1 reactor alone at Three Mile Island could add $1.70 per share in incremental earnings and $445 million in net income. The operational risk to bring the plant back online in 2028 appears manageable, Morgan Stanley told clients in a note on Monday. The restart is supported by Microsoft , a strong counterparty, which is purchasing the power over a “very long” contract of 20 years. “We think this means upside for future nuclear deals,” Arcaro said. CEG YTD mountain Constellation shares in 2024. Vistra Corp. stock is also rising in sympathy Monday on potential opportunities for its nuclear portfolio, after climbing more than 16% on Friday. Morgan Stanley raised its price target for Vistra to $132 per share, suggesting a return of 22% from the Friday close of $107.88. The investment bank valued future data center deals for Vistra at $39 per share. Public Service Enterprise Group also got a boost from Morgan Stanley on its nuclear portfolio, with a new price target of $95 indicating a return of more than 9% over Friday’s close of $86.76 per share. Renewable energy and natural gas stocks could also indirectly benefit from nuclear deals, according to Morgan Stanley analyst Stephen Byrd. Microsoft is not locating a data center directly at Three Mile Island. Rather, it is purchasing power from the plant to offset the emissions of its data centers. However, power companies such as Constellation and the tech sector are also interested in locating data centers at nuclear plants. Tech companies and other developers that build data centers at nuclear plants might then invest in renewable and natural gas generation to fill the resulting gap on the grid, Byrd told clients in a note on Monday. Companies that build natural gas power generation equipment such as GE Vernova , Siemens Energy and Mitsubishi Power are potential beneficiaries, as well as power companies with natural gas plants such as Vistra and NRG Energy . Renewable stocks such as AES Corp. , NextEra Energy and First Solar could get a tailwind for the same reason, according to Morgan Stanley. NextEra also has a nuclear opportunity. CEO John Ketchum said the company is looking at restarting the Duane Arnold nuclear plant in Iowa. Restarting the plant would add $1 of value per share of NextEra, according to Wells Fargo. NextEra’s large solar and wind portfolio will also benefit from data center demand: “The need for gobs of power, preferably clean, is long-term bullish for NEE’s core renewables business,” Wells analyst Neil Kalton told clients Monday. — CNBC’s Michael Bloom contributed to this report.