NRG Energy is Monday's IBD Stock Of The Day as the top-performing S&P 500 stock rides high so far in 2025. NRG stock is close to a new buy point from a three-weeks-tight pattern after exploding higher on earnings and a major deal on May 12, which left it better positioned to capitalize on the energy boom fueled by AI data-center demand.
"We are in the early stages of a power demand supercycle," NRG CEO Larry Coben said in announcing the $12 billion acquisition of LS Power Equity Advisors. The deal, he said, "transforms NRG's generation fleet," strengthens its credit profile, "turbocharges" growth and supports continued capital returns to shareholders.
NRG Energy Doubles Capacity
NRG said the acquisition of LS Power's 18 natural-gas-fired facilities doubles its energy-generation capacity to 25 gigawatts. The facilities are mostly in NRG's core markets in the Northeast and Texas, providing cost synergies and giving it the scale to better compete for big customers.
With the deal's announcement, NRG raised its five-year compound annual growth target for earnings per share to 14% from 10%. It also predicted five-year capital returns, via buybacks and dividends, of $9.1 billion over five years.
Following the deal, Guggenheim hiked its NRG price target to 173 from 138, keeping a buy rating. Wells Fargo raised its target to 200 from 165, keeping an overweight rating. Guggenheim analysts highlighted the deal being accretive to earnings and coming at "a sensible multiple." They also noted a "vote of confidence" for NRG, with LS Power receiving $2.8 million in stock to participate in equity returns.
S&P 500 Year-To-Date Leaders
Through Friday, NRG led all S&P 500 stocks with a 74% year-to-date return. Palantir Technologies was next in line, up 70.8%, then Howmet Aerospace with its 60.6% gain.
NRG is part of the S&P 500 utilities sector, which has advanced 6.54% year to date, second only to the industrials sector, with a 9.7% gain. The industrials group includes GE Vernova, which is also fueled by the long-term energy demand opportunity and is up 47%.
NRG and GE Vernova joined forces in February, announcing a plan to build four new natural-gas-fired power plants.
GEV is part of the IBD Leaderboard portfolio of elite stocks.
NRG Stock
NRG Energy dipped a fraction in afternoon stock market action. It traded just below a new 162.33 buy point from a three-weeks-tight pattern, following two weeks in which the stock rose or fell no more than 1.5%. Last week, NRG rose less than 0.1%.
NRG stock broke out from a first-stage base in April after undercutting the lows of its prior base. Three-weeks-tight patterns are follow-on opportunities and tend to be more opportunistic in early-stage bases.
According to IBD Stock Checkup, NRG is ranked No. 1 in the IBD Utility-Diversified industry group, with a stellar 98 IBD Composite Rating out of 99. That's a single rating based on technical and fundamental factors.
IBD has a moderate 4.1% 21-day average true range ratio, a measure of daily trading volatility, according to MarketSurge. While it makes sense to avoid packing your portfolio full of high-octane stocks, NRG doesn't present much of a concern on this front, given the healthy market backdrop.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
