Should You Buy Constellation Energy While It's Below $360?

AI-driven growth in data centers is set to sharply increase global power demand (Goldman Sachs: +50% by 2027, up to +165% by decade-end), and hyperscalers are locking in long-term supply from providers such as Constellation Energy. Constellation — the U.S. largest nuclear operator with 14 stations (~22 GW) and a 94.6% three-year nuclear capacity factor — has a 20-year PPA with Meta for the 1,121 MW Clinton plant, is expediting relicensing and restart, expects additional hyperscaler deals, and is buying Calpine for $27 billion to add natural gas and geothermal assets coast to coast. A PJM capacity auction cleared Constellation's fleet at the regional price cap, analysts forecast adjusted EPS to nearly double from 2024 by 2028 (~18% CAGR), and while the stock is down ~19% from its peak and trades at a premium for a utility (~29.9x next-year EPS), the company appears well positioned to benefit from tightening supply margins and surging data-center power demand.

Analysis

Goldman Sachs projects global data-center power demand rising 50% by 2027 and up to 165% by decade-end, creating material incremental demand for large, reliable generation capacity. Constellation is the largest U.S. nuclear operator with 14 stations (~22 GW) and a three‑year nuclear capacity factor of 94.6%, roughly 4 percentage points above the industry average since 2013; the stock has pulled back ~19% from a $412 peak and trades below $360 at ~29.9x next‑year EPS (down from 35.7).

Operational and strategic developments are driving near‑term optionality: a 20‑year PPA with Meta covers the entire 1,121 MW Clinton plant and management is expediting relicensing and restart (analysts say ahead of schedule), Constellation expects to close a $27 billion acquisition of Calpine in Q4 to add gas and geothermal assets, and the CEO says additional hyperscaler deals may be announced before the late‑February Q4 earnings call. A PJM 2026‑27 capacity auction cleared Constellation’s fleet at the regional price cap, signaling tightening supply margins that should support earnings.

Analysts forecast adjusted EPS to nearly double from 2024 to 2028 (~18% CAGR), which helps justify a premium multiple if execution is successful, but material execution risks remain: completing the Calpine close, converting PPA pipeline into signed contracts, and completing relicensing/restarts. The ~19% pullback reduces near‑term entry price risk, yet valuation remains rich for a utility and outcomes will be driven by deal and operational execution rather than macro sentiment alone.

Key Decisions for Investors

• Consider initiating or adding a measured position on the pullback to capitalize on AI‑driven data‑center demand, but size exposure conservatively given execution risk
• Monitor near‑term catalysts closely—Calpine closing in Q4, additional hyperscaler PPA announcements, and Clinton relicensing/restart—and use confirmed progress to scale into the position
• Given a 29.9x forward multiple, employ staged purchases or hedges (covered calls or collars) rather than full allocation up front to protect against missed execution
• Watch PJM capacity auction outcomes and any regulatory developments on nuclear relicensing as leading indicators that would materially change earnings and valuation expectations