Maryland reaches $340 million Conowingo Dam agreement with Constellation
Investing.com - UBS has reiterated a Buy rating and $230.00 price target on Vistra Energy (NYSE:VST), citing a strong fundamental backdrop for the company to realize upside in EBITDA and cash flow due to intense power demand. The stock has demonstrated remarkable strength, delivering nearly 68% returns over the past year, with analysts maintaining a strong buy consensus and a high target of $261. According to InvestingPro, the company maintains a GREAT financial health score.
The investment bank noted two recent announcements from Vistra that support its positive outlook. First, the company's Comanche deal, though only for half of the output, is expected to deliver 8-10% free cash flow accretion, potentially adding $400-500 million in free cash flow.
UBS estimates this implies a per MWh margin upside of $40-48/MWh, which based on around-the-clock power prices in ERCOT at the end of August could suggest a power price of $95-105/MWh. The firm indicated this is consistent with its view while noting investors await more information on the longer-term potential for the remaining Comanche output.
Separately, Vistra's decision to proceed with investments in 860 MW of gas plants in the Permian Basin could add $100-$175 million of EBITDA in 2028. UBS views this announcement as affirmation of significant demand in the region and a constructive environment for investing.
UBS previously estimated $4.7 billion in free cash flow for Vistra in 2027, representing a 6.5% yield.
In other recent news, Vistra Corp. announced a significant 20-year power purchase agreement to supply 1,200 megawatts of carbon-free electricity from the Comanche Peak Nuclear Power Plant. This agreement, which includes options to extend for up to an additional 20 years, is expected to begin power delivery in the fourth quarter of 2027. Additionally, Vistra plans to build two new natural gas power units in the Permian Basin, increasing the site’s capacity to 1,185 megawatts as part of a broader plan to add over 2,000 megawatts of new generation capacity to the Texas ERCOT market by 2028.
In the realm of stock analysis, JPMorgan has raised its price target for Vistra Energy to $248, maintaining an Overweight rating, while Scotiabank initiated coverage with a Sector Outperform rating and a price target of $256. However, S&P Global Ratings has downgraded Vistra Holdings to 'B', citing slower deleveraging and challenging business conditions, though it maintains a stable outlook. The rating agency now expects Vistra's organic revenue growth for 2025-2026 to slow to 3%-5% annually. These developments reflect a mix of strategic growth initiatives and challenges faced by Vistra Corp.
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