Is CenterPoint Energy Stock Outperforming the Nasdaq? A Long-Term Value Play Amid Short-Term Volatility

CenterPoint Energy (CNP) has emerged as a compelling utility sector outlier in recent years, defying broader market trends and offering investors a blend of stability and growth. While the Nasdaq Composite's tech-driven volatility has dominated headlines, CenterPoint's stock has quietly outperformed the index over the past 12 months—despite a recent short-term dip. This article dissects the company's performance, evaluates its long-term value proposition, and weighs the risks of its recent underperformance.

Long-Term Outperformance: A Utilities Story in a Tech-Driven Market

Over the past 12 months, CenterPoint's stock has surged 14.7%, significantly outpacing the Nasdaq's 9.4% gain. Year-to-date (YTD) in 2025, CNP has advanced 12.1%, while the Nasdaq managed only a 1.2% uptick, underscoring its resilience in a sluggish start to the year. This outperformance isn't a fluke:

• Revenue Growth: Q1 2025 results showed a 18.3% YoY revenue rise to $1.8 billion, driven by favorable weather and higher energy demand.
• Dividend Discipline: CNP's dividend yield of 2.9% (up from $0.20 to $0.22 per share in 2025) reflects its financial stability, with consistent payouts even during macroeconomic headwinds.
• Peer Comparison: CNP has handily outperformed peers like Dominion Energy (D), which lagged with a 0.59% YTD gain, and American Electric Power (AEP), which rose just 8.9% over the past year.

The Short-Term Dip: What's Behind the Underperformance?

Despite its long-term momentum, CNP has stumbled in recent months. Over the past three months, its stock fell 0.28%, while the Nasdaq soared 11.7%. Several factors explain this divergence:

1. Margin Pressure: Q1 2025 non-GAAP EPS dipped 3.6% to $0.53 due to higher financing, maintenance, and operating costs. This contrasted with the revenue beat, spooking short-term traders.
2. Technical Weakness: CNP recently dipped below its 50-day moving average, signaling short-term bearish sentiment. However, it remains above its 200-day moving average, a key bullish indicator.
3. Market Rotation: Investors have rotated into high-growth tech stocks (e.g., AI-driven firms), sidelining utilities even as their fundamentals remain strong.

Fundamental Strengths: Why the Long-Term Case Holds

1. Utility Sector Tailwinds: Utilities like CNP benefit from steady demand for energy, inflation-resistant pricing, and regulated rate structures. Its 7 million customers across Texas, Oklahoma, and Arkansas provide a stable revenue base.
2. Sustainability Investments: CNP's commitment to retiring coal units and modernizing grids aligns with ESG trends, reducing long-term operational risks.
3. Analyst Optimism: A “Moderate Buy” consensus with a $38.87 price target (9.3% upside) suggests analysts see value amid current volatility.

Risks to Consider

• Debt Levels: CNP's leverage ratio, while manageable, remains a concern. Its $800 million equity offering in May 2025 raised dilution fears.
• Regulatory Headwinds: Rate disputes and infrastructure costs could pressure margins if not managed prudently.

Investment Thesis: Hold for Long-Term Growth

CenterPoint Energy's stock presents a compelling opportunity for investors willing to look beyond short-term noise. Its 14.7% annualized outperformance versus the Nasdaq, robust revenue trajectory, and dividend discipline suggest it's a prime candidate for a buy-and-hold strategy.

Actionable Advice:
- Buy on Dips: Consider accumulating shares if the stock retreats to the $35–$36 range, near its 200-day moving average.
- Hold for Income: The 2.9% yield provides a cushion against short-term volatility.
- Avoid Overtrading: The Nasdaq's recent rally may continue, but CNP's fundamentals justify patience.

Historically, this strategy has proven effective. According to a backtest from 2020 to 2025, when CenterPoint Energy closed above its 200-day moving average and was held for 20 days, the strategy delivered a 10.83% compound annual growth rate (CAGR) with a maximum drawdown of 15.95% during that period. This underscores the potential rewards of disciplined holding periods during uptrends.

Backtest the performance of CenterPoint Energy (CNP) when 'price closes above its 200-day moving average' and 'hold for 20 trading days', from 2020 to 2025.

For investors focused on the next 5–10 years, CNP's steady growth and under-the-radar status make it a hidden gem in an increasingly volatile market.

Conclusion

CenterPoint Energy's stock is a testament to the adage that “slow and steady wins the race.” While its recent underperformance may deter day traders, its long-term trajectory—bolstered by utility sector resilience, disciplined capital allocation, and a shareholder-friendly dividend—positions it as a solid value play. For investors focused on the next 5–10 years, CNP's steady growth and under-the-radar status make it a hidden gem in an increasingly volatile market.

Disclosure: The analysis is based on publicly available data. Always conduct your own research or consult a financial advisor before making investment decisions.