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On Friday, Goldman Sachs initiated coverage on Vistra Energy (NYSE:VST) with a Neutral rating and set a price target of $134.00. The firm’s analysis acknowledged Vistra Energy’s high-quality asset base, particularly highlighting its 6.5 gigawatts of nuclear capacity. With a market capitalization of $36.7 billion and impressive revenue growth of 16.5% in the last twelve months, Vistra has shown strong business momentum. According to InvestingPro analysis, the stock appears undervalued at current levels. However, the firm pointed out that the current valuation levels offer less upside and carry greater headline risk, especially concerning behind-the-meter and colocation deals.
Goldman Sachs based their valuation on an approximate 8x enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple on Vistra Energy’s fifth to eighth quarter estimates. This multiple is higher than the historical average, which is closer to 7x. Current InvestingPro data shows an EV/EBITDA ratio of 8.18x, with the company maintaining strong profitability metrics and a P/E ratio of 15.4x. InvestingPro subscribers have access to 12 additional key insights about Vistra’s valuation and growth prospects. The firm noted that while Vistra Energy’s business holds value, particularly in the long term as it leverages its nuclear capacity for potential data center deals, the market has already factored some of these prospects into the company’s valuation, pushing it above historical levels.
The coverage comes at a time when Vistra Energy’s exposure to potential behind-the-meter deals is seen as a vulnerability. These deals could face delays or be impacted by uncertainty around colocation, which could pose risks to the company’s outlook. Goldman Sachs emphasized that these factors contribute to the headline risk associated with the company’s stock.
Despite these concerns, Goldman Sachs sees long-term value in Vistra Energy’s business model. The firm believes that the company is well-positioned to capitalize on its nuclear capacity in future data center deals. Supporting this view, InvestingPro data reveals the stock has delivered an impressive 54.7% return over the past year, though it has recently experienced a 9.1% decline in the past week. The company’s strong financial health score and consistent dividend growth history of six consecutive years further reinforce its long-term potential.
Investors and market watchers will be keeping an eye on Vistra Energy’s stock as it responds to the new coverage and price target from Goldman Sachs. The company’s future performance will likely be influenced by its ability to navigate the risks and capitalize on the opportunities outlined by the firm.
In other recent news, Vistra Energy reported its fourth-quarter 2024 earnings, significantly surpassing analyst expectations with an earnings per share (EPS) of $2.38, compared to the forecasted $1.39. The company’s revenue also exceeded projections, reaching $17.22 billion, well above the anticipated $3.72 billion. Despite these strong financial results, Fitch Ratings revised Vistra Holdings’ outlook to negative due to slower-than-expected deleveraging and higher net leverage. Fitch affirmed the company’s Long-Term Foreign-Currency Issuer Default Rating at ’B+’ and expects Vistra’s EBITDA net leverage to remain above 6.0x in 2025. Meanwhile, Jefferies analysts lowered their price target for Vistra Energy to $151, maintaining a ’Buy’ rating and noting potential upside if data center deals are realized. BofA Securities also upgraded Vistra Energy from Neutral to Buy, setting a new price target at $152, citing potential benefits from tightening energy markets and legislative developments. These are the latest developments surrounding Vistra Energy, providing investors with insights into the company’s current financial and strategic positioning.
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