J.P. Morgan analyst Jeremy Tonet remains constructive on the power sector, viewing it as "washed out" despite current bearish sentiment.
He attributes this outlook to strong demand growth driven by broader electrification trends, industrial onshoring, and heating trends while also noting regulatory uncertainty as a key factor influencing market dynamics.
Here are the analysts' takes on some major players in the sector:
Talen Energy Corporation
The analyst highlights that Talen operates a near pure-play PJM generator model with a gas-heavy fleet, offering high leverage to PJM pricing trends and potential upside from higher demand growth.
Talen's multi-decade Susquehanna deal with Amazon is expected to drive significant near-term EBITDA growth, with the potential for further expansion if Talen supplies more than 960MW.
With attractive expected EBITDA growth in 2025 and 2026, a strong balance sheet, and capital flexibility, the analyst sees potential for Talen to close its valuation gap to peers, especially with favorable outcomes from the ISA resolution and Susquehanna growth.
TLN shares are trading lower by 2.81% to $197.09 at last check Friday.
Constellation Energy Corporation
Tonet maintains that key factors for Constellation's future include progress in BTM, successful integration of the Calpine acquisition (including PJM asset sales), and potential gas generation contracting opportunities, particularly after the Calpine deal is closed.
Although there were initial concerns regarding carbon-free asset dilution, the analyst remains positive on gas generation and contracting, noting these opportunities will allow Constellation to benefit from favorable power supply and demand trends, which are advantageous for Independent Power Producers.
CEG shares are trading lower by 2.06% to $204.89 at last check Friday.
Vistra Corp.
The analyst suggests that oil prices will continue to drive growth in Permian producers' activity, leading to an oversupply of natural gas and keeping Waha prices low.
Vistra Energy, with significant exposure to the Texas power market, is well-positioned to benefit from power price spikes, increased base load demand, and the expected supply gap by 2030.
Additionally, the company's large retail business, hedging program, and nuclear exposure through the Energy Harbor acquisition are expected to reduce earnings volatility and support double-digit EBITDA growth.
VST shares are trading lower by 0.15% to $119.13 at last check Friday.
