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Investing.com -- TD Cowen has initiated coverage of the U.S. Power and Utility sector with a positive outlook, naming PG&E Corporation and Vistra Corp as their top picks amid growing electricity demand from data centers and the need for infrastructure upgrades.
The investment bank expects power prices to remain elevated in key deregulated markets for the foreseeable future, creating a favorable environment for select power companies. Their analysis points to significant growth opportunities driven by infrastructure needs and market dynamics.
Here’s a breakdown of TD Cowen’s top-ranked power stocks:
PG&E Corporation (PCG)
TD Cowen views PG&E as a de-risking but capital-intensive utility with strong growth potential. The company is projected to deliver earnings per share growth supported by $7-8 billion in annual rate base expansion from 2025-2030. This growth will be primarily driven by undergrounding efforts, wildfire hardening, transmission for renewables and storage, and accelerating electrification across EVs, buildings, and data centers. While wildfire liability and affordability pressures remain key risks, analysts believe the extension of California’s Wildfire Fund, stronger regulatory framework, and improving safety performance significantly reduce PG&E’s risk profile. The company earned its top pick status due to California’s more holistic approach to solving its wildfire challenges.
In recent news, PG&E Corporation was upgraded to investment grade by Fitch Ratings, which noted the company’s progress in reducing wildfire risk. The utility also completed a $2 billion mortgage bond sale, while BMO Capital raised its price target and Jefferies lowered its target.
Vistra Corp (VST)
TD Cowen describes the investment case for Vistra as "straightforward." The company’s generation assets benefit from locational advantages, particularly around the fast-growing Dallas market. Analysts expect Vistra’s EBITDA to grow by 8.4% through 2030, driven by tightening power supply/demand dynamics leading to higher prices for both energy and capacity. The bank finds Vistra’s ERCOT footprint particularly compelling compared to peers, noting that market dynamics in Texas are outpacing the rest of the country with potentially lower regulatory and political risk in future years. Additional upside to earnings estimates could come from accretive M&A and longer-term PPA agreements.
Vistra Corp announced the pricing of a $2 billion senior secured notes offering and also amended a credit agreement to extend its maturity. On the analyst front, BMO Capital raised its price target on the company, and UBS reiterated a Buy rating.
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