This Stock is So Undervalued, BoA Says

Bank of America has upgraded Constellation Energy to a buy rating and raised its price target to $269, suggesting a potential upside of 14% over the next year.

According to analyst Ross Fowler, Constellation Energy is well-positioned to thrive as the PJM Interconnection, the largest power grid operator in the U.S., faces a looming power deficit. As the largest supplier of clean baseload power to the PJM grid, Fowler sees this as a key driver for the stock's upside potential.

The analyst also highlighted the importance of data centers to Constellation's growth prospects. As companies seek clean and efficient ways to power the energy-intensive infrastructure needed for artificial intelligence and other technological advancements, nuclear energy has emerged as an attractive option, benefiting Constellation.

Earlier this year, Constellation announced plans to restart operations at the Three Mile Island nuclear facility within the next four years. Additionally, Fowler believes that Constellation's business model, which provides clean, baseload generation, and its compelling valuation relative to peers, make it a unique investment opportunity.

We believe CEG offers a unique investment opportunity, with sustained double-digit growth, an asset mix and business model that provides clean, baseload generation, and a compelling valuation relative to peers, Fowler wrote in a note to clients.

Despite some potential headwinds, such as declining power prices and competition in the retail business, Fowler believes these factors will be offset by tax credits that are expected to remain in place due to bipartisan support.

Constellation's shares have already surged more than 102% year-to-date, but Fowler believes the market has not fully priced in the company's potential. This potential is not reflected in its current share price, he added. As such it is undervalued.

Zacks Investment Research also highlighted Constellation Energy's strategic investment plans and its focus on expanding its renewable portfolio as key drivers of its earnings performance. The firm expects the company to increase nuclear output and implement plans to upgrade its plants, leading to increased output without additional operating and maintenance expenses.