Stock Pick of the Week (6/8)
Overview
Constellation Energy Corp. is the United States’ largest producer of clean energy (10%). They have historically been categorized within the defense utility sector, but the explosion of AI data centers has fundamentally changed their trajectory. CEG holds critical control over nuclear energy and acts as a bottleneck for increasing energy demands.
Fundamental Mispricing
Legacy Wall Street models evaluate CEG against traditional utility baselines with capped, highly regulated returns. In reality, CEG operates as an unregulated infrastructure provider. They are capable of securing multi-decade-long power contracts for massive companies that require 24/7 power.
Despite operating as the key to AI’s and the greater tech industries' growth, Constellations EV/EBITDA sits at an extremely reasonable 18.25, placing it on par or cheaper than peers in independent power production. The company’s growth is anchored by consistent earnings that have repeatedly beaten market expectations—as shown by its recent Q1 adjusted EPS of $2.74, outpacing the $2.61 consensus estimate. Constellation projects $8.4 billion in free cash flow across 2026 and 2027 combined. This could rapidly expand to between $11.5 billion and $13.0 billion in 2028 and 2029 as their infrastructure contracts scale.
Macro and Commercial Catalysts
CEG is riding on the undeniable tailwinds of data center energy consumption. They are projected to swallow 12% of total U.S. demand by 2028, and honestly, that seems conservative. Constellation has capitalized on this through its landmark 20-year power purchase agreement to sell 100% of the resurrected Three Mile Island facility (rebranded as the Crane Clean Energy Center) to Microsoft. They also acquired Calpine earlier this year, allowing them to expand into natural gas and geothermal to fill the gaps in their large nuclear fleet.
On June 1, 2026, the Federal Energy Regulatory Commission (FERC) approved a rule waiver allowing CEG to transfer 760 megawatts of capacity interconnection rights to the Crane facility. Essentially, when a power plant is built or retired, you have to enter a multi-year-long queue to hook it up to our already overloaded energy grid. But because CEG is retiring another 760 MW facility in Pennsylvania, they received special approval to transfer the rights and move the commercial power delivery timeline from 2030 to 2027.
Technical Analysis
Following a massive 150% breakout over the past two years, the stock is currently undergoing a liquidation flush. On June 1, 2026, institutional shareholders executed an 11-million-share secondary offering priced at $281.00 per share. Crucially, however, CEG management stepped in to buy back 2 million of those shares at $281. Because of the supply dump, the stock pushed below its 50-day moving average to $254, $26 cheaper than what the company's CEO and board paid. Panicking short-term investors are creating a unique entry point for long-term growth.
Why-to-Buy
Constellation Energy is a high-conviction asset with a proven track record of beating earnings. They are riding on AI tailwinds with a clear regulatory runway. With their 18.25 EV/EBITDA multiple and a technical chart that has successfully de-risked its overbought reading into a prime entry point. The equity has plenty of room to break past its recent $281 high and lead into the next leg of an infrastructure bull market.