The Utilities sector represented by the Utilities Select Sector SPDR ETF. New York Stock Exchange: XLUis experiencing turbulence, having retreated nearly 7% from its 52-week high since early December. The decline marks a sharp reversal from previous performance as capital flows have flown out of the sector. Over the past three months, the XLU ETF has reported net outflows of 6.28%, signaling a change in investor sentiment.
Previously, the utilities sector benefited from tailwinds such as Federal Reserve rate cuts and rising energy demand driven by growing adoption of electric vehicles. However, the renaissance of nuclear power has played a huge role in the sector’s recent development. With projected growing demand from artificial intelligence (AI) and data centers, nuclear energy is positioned as a critical component of a clean energy future, attracting significant investor interest.
Amid this wave of enthusiasm, shares of several nuclear-focused companies have soared to impressive heights. One standout player, Vistra Corp. New York Stock Exchange: VSTby November, it had become the best-performing stock in the S&P 500. However, after its recent failure, VST lost its position to Palantir Technologies. New York Stock Exchange: PLTR. With Vistra and other key players retreating along with the broader sector, could this decline present an opportunity to gain exposure to nuclear energy stocks? Let’s dive into the details.
Vistra Corp: clear industry leader
Vistra today
(As of 5:23 p.m. ET)
- 52 week range
- $37.38
▼
$168.67
- Dividend yield
- 0.61%
- P/E ratio
- 27.11
- Target price
- $149.10
Despite being down 14% from its 52-week high, Vistra remains one of the S&P 500’s best-performing stocks year-to-date, posting a massive 276% gain. The company is uniquely positioned to benefit from artificial intelligence-driven electricity demand, operating 41,000 megawatts (MW) of generating capacity, including 6,400 MW of nuclear power. It also has the second largest energy storage facility in the United States, a critical asset for balancing energy supply and demand in the age of artificial intelligence.
Financially, Vistra looks attractively valued after the downturn. The stock is trading at a price-to-earnings (P/E) ratio of 27.4 and a forward P/E of 20.8, which is close to benchmarks that could spell a bargain for value investors. The company has a price-to-sales (P/S) ratio of 3.2 and earnings per share (EPS) growth of nearly 40% in 2024.
Recent earnings, released in November, showed revenue estimates 25% ahead of the $6.28 billion estimate, although EPS narrowly missed analysts’ estimates by 3%. Sales increased year over year by 53.9% in the last reported quarter and by 54% in the third quarter of 2024. Notably, the company’s cash flow growth of 261% far exceeds the industry average of 6.3%. Historically, the annual cash flow growth rate of 17.8% over the past 3-5 years exceeds the sector average of 6.1%.
From a technical perspective, Vistra shares are approaching critical support around $140, which coincides with the rising 50-day simple moving average (SMA). This level can serve as a favorable entry point for investors in terms of risk and reward. However, if this support is broken amid continued sector weakness, the next significant level would be around $120. Analysts remain bullish on the stock, with all ten Wall Street analysts covering the stock rating it a Buy. The consensus price target implies a modest 3% upside from current levels, reflecting confidence in the company’s potential even after its stellar 2024 performance.
Speculative bets on nuclear innovation
NuScale Power today
NuScale Power
(As of 5:23 p.m. ET)
- 52 week range
- US$1.88
▼
$32.30
- Target price
- $10.39
While Vistra offers stability and proven growth, smaller nuclear stocks have attracted attention for their disruptive innovation and speculative appeal.
Companies like NuScale Power Corporation New York Stock Exchange: SMROklo Inc. New York Stock Exchange: OKLOand Nano Nuclear Energy Inc. NASDAQ: NNE pushing the boundaries of nuclear technology.
NuScale is a leader in the field of advanced small modular reactors (SMRs), offering a compact and scalable alternative to traditional reactors.
Oklo today
(As of 5:30 p.m. ET)
- 52 week range
- $5.35
▼
$28.12
- Target price
- US$10.00
Oklo specializes in fast fission reactors for clean energy, while Nano Nuclear specializes in microreactor technologies, including the ZEUS solid-state battery reactor.
These mid-cap companies are largely revenue-neutral and rely heavily on raising additional capital to achieve operating goals.
As a result, their share prices are significantly more volatile than established players such as Vistra.
Nanonuclear energy today
Nano-nuclear energy
(As of December 16, 2024 ET)
- 52 week range
- US$3.25
▼
$37.51
- Target price
- $58.00
All three stocks have retreated more than 30% from their recent highs, reflecting the risks associated with their speculative nature.
These stocks may be attractive to investors willing to accept higher risk in exchange for potentially huge rewards. However, they require a long-term horizon and a strong tolerance for volatility.
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