To The Moon

$Vistra Energy Corp.(VST)$ is a powerhouse in retail electricity and generation, boasting a generation capacity of 37GW across gas, nuclear, coal, solar, and battery storage. Recently, its stock has taken off, but the clean energy investment story remains bright.

It’s no surprise that Vistra’s stock performance has been impressive this year, considering natural gas accounted for 66% of its net generation in FY2023 (though Q2 for FY2024 hasn’t been reported yet).

Vistra's year-to-date stock gains are largely thanks to a boom in generative AI and data center spending. More and more major players are reporting higher energy consumption, and data center REITs are facing power constraints.

Most importantly, it’s no shock that big tech and the U.S. government are pivoting toward clean energy to cut carbon emissions.

The recent stock jump is largely fueled by two new solar power purchase agreements that Vistra announced. The market clearly loves this news—shares shot up 44.3% since the announcement, despite a mixed bag in the Q2 earnings report.

With its strategic partnerships and a diverse portfolio in the U.S., Vistra seems poised to be a long-term winner in the clean energy and generation space.

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Thanks to strong tailwinds, consensus forecasts have been raised, with expectations for accelerated revenue and profit growth through FY2026, projecting a compound annual growth rate (CAGR) of 10.6% for revenue and 16.3% for profits—up from initial estimates of 6.6% and 6%.

Valuation

Because of all this, even though Vistra’s five-year averages sit at 7.94x for EV/EBITDA and 15.16x for P/E, with utility sector medians at 11.39x and 17.86x, the stock isn’t overpriced. Its forward EV/EBITDA is at 12.33x, with a non-GAAP P/E of 23.10x.

This is largely due to its low non-GAAP PEG ratio of 0.50, based on expected adjusted EPS growth of 46% CAGR through FY2026.

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Even compared to its peers in the nuclear utility sector—like Southern Company with a non-GAAP PEG of 3.18 and Constellation Energy at 1.67—it’s clear that despite the recent stock bump, Vistra remains a bargain.

Even against other nuclear-related stocks, such as Rolls Royce Holdings at 1.11 and BWX Technologies at 3.37, Vistra’s growth potential and earnings story are still enticing for those who missed the latest price surge.

Since November 2, 2021, its float has dropped by 29%, showing that Vistra is generating substantial shareholder-friendly free cash flow while boosting its EPS growth.

What’s Next for Vistra?

Now that Vistra has hit new highs, well beyond its historical trading range and its 50/100/200-day moving averages, it’s clear we’re entering a phase of exuberance.

This excitement is largely driven by the Fed’s recent pivot and ongoing demand for AI, as seen with the McClellan Volume Sum Index rising to 1,745.83, well above the neutral point of 1,000.

With a one-year EV/EBITDA average of 8.2 (not far from its five-year average of 7.94, though higher than the pre-pandemic average of 6.56), the stock is trading around $114.40.

Using a similar calculation for the consensus adjusted EBITDA estimate of $6.44 billion for FY2026, that gives us an estimated adjusted EBITDA per share of $18.72, leading to a long-term price target of $153.50—an enticing 34.4% upside!

Risk Warnings

First off, as the market nears extreme greed levels, we might see a short-term pullback when market sentiment normalizes—this could slightly trim some of Vistra's recent gains.

Secondly, while Vistra may have hedged some of its natural gas positions for 2025, those commodities are notoriously volatile and could create profit headwinds.

Thirdly, Vistra’s power purchase agreements with $Amazon.com(AMZN)$ and $Microsoft(MSFT)$ won’t likely boost revenue or profits in the short term, as they’re “only just starting construction on two new solar facilities in Texas and Illinois.”

So, investors might want to temper their short-term expectations, especially since renewable energy (solar/battery) only makes up 4% of its net capacity for FY2023, and nuclear was at 7% before the recent acquisition.