Jefferies lowers Vistra rating, sees stock pricing in full Comanche deal

Jefferies downgraded Vistra Corp. (VST) to 'hold' from 'buy,' cutting its price target to $230 from $241, citing delays in a key nuclear contract at Comanche Peak and the stock's substantial 160% rally, which has priced in significant data center value ($70/share) assuming a near-perfect contracting outcome. The firm reduced its probability assumptions for future gas-related data center agreements and flagged valuation concerns, despite raising Vistra's 2026 EBITDA estimates to $7.4 billion, 6% above consensus, due to higher Texas power prices and strong core business performance.

Analysis

Jefferies has downgraded Vistra Corp. (VST) to “hold” from “buy,” lowering its price target to $230 from $241, primarily due to valuation concerns after a 160% stock appreciation in the past year. The firm argues that the current share price, trading near its all-time high, has already priced in a near-perfect outcome for data center-related power contracts, equating to approximately $70 per share in value. This assumption includes a 100% probability for the Comanche nuclear deal and a 75% probability for PJM nuclear contracts. Compounding this valuation risk are noted delays in the Comanche deal and a lack of new data center announcements from Vistra this year, prompting Jefferies to reduce its probability assumption for future gas-related agreements. Despite the downgrade, the analysis highlights Vistra's strong core business, with Jefferies raising its 2026 EBITDA estimate to $7.4 billion (6% above consensus) on the back of higher Texas power prices. However, the valuation appears stretched relative to peers, as Vistra's 7.5% free cash flow yield is noted to be significantly below that of NRG, which is in the teens. Jefferies' revised price target reflects this balanced view, acknowledging fundamental strength but cautioning that the risk/reward is no longer compelling until a pullback occurs or contracting uncertainty is resolved.

Key Decisions for Investors

• Given the stock has priced in significant upside from data center contracts that now face timing risks, investors with substantial gains may consider trimming positions to lock in profits as the risk/reward profile has become less favorable.
• Potential new investors should exercise caution, as the analysis suggests waiting for a share price pullback or for more concrete progress on the Comanche nuclear contract to secure a better entry point.
• All investors should closely monitor Vistra's third-quarter earnings call for critical updates on 2026-2027 guidance, capital allocation, and the specific timing of data center contracts, which are now the primary catalysts for the stock.
• Consider that Vistra's valuation premium over peers like NRG is explicitly tied to the successful execution of these large-scale power agreements, making the stock highly sensitive to any further delays or negative contracting news.