Electricity supplier Constellation Energy is the IBD Stock of the Day, after shares topped a buy point amid the latest sign that energy demand is ballooning.
Constellation is one of the largest clean-energy providers in the nation, operating more than a dozen nuclear power plants. It also runs natural gas, hydroelectric, hydrogen, wind and solar plants. The company says it provides 10% of the country's carbon-free power.
The Baltimore, Md.-based utility is a direct beneficiary of the boom in artificial intelligence, which requires massive amounts of electricity for the data centers that handle AI computations.
President Donald Trump and major tech companies plan to add Pennsylvania to the major U.S. hubs for artificial intelligence data centers, with natural gas as the main fuel for the electricity. As those plans were announced July 15, Constellation said it planned to spend billions of dollars on nuclear energy projects in the Keystone State.
The company said the Pennsylvania initiative will make it possible to move up the restart of the Crane Clean Energy Center by a year, in 2027. Meanwhile, Constellation has asked the Nuclear Regulatory Commission to renew the operating license of the Peach Bottom Clean Energy Center. It is also looking to secure customer commitments to increase capacity by 340 megawatts at its Limerick Clean Energy Center.
Auction Augurs Well For Stock Of The Day
In another sign of the vast demand for energy, power grid operator PJM Interconnection said Wednesday that in its latest auction, prices jumped to $329.17 per megawatt-day (from $269.92 in the previous year's auction).
In other indications of heavy demand, PJM said the auction marked the first increase in new generation and uprates in the last four auctions. Also, 17 generating units have shelved retirement plans. And PJM's forecast peak load for the 2026-27 delivery year increased by more than 5,400 MW, "driven largely by data center expansion, electrification and economic growth."
In a note to clients, a Morgan Stanley analyst said the price increase in the PJM auction has the most meaningful impact on EBITDA for Talen Energy, with "modest impacts" for Vistra, Constellation Energy, PSEG and NRG Energy. The auction, the analyst added, reflects tight market fundamentals, TheFly.com reported.
Analysts' consensus earnings estimate for Constellation's second quarter is $1.85 a share, an increase of 10.3% year over year, according to FactSet. Sales are expected to fall 9.2%, however.
Stock Of The Day Clears Buy Point
Constellation Energy stock gapped up more than 4% in heavy trading Wednesday, then reversed to a narrow gain. The stock grazed the 342 buy point of a lopsided eight-week base before retreating, according to MarketSurge pattern recognition. The stock also rose above the June 27 high of 328.44, which serves as a lower entry. At the same time, Constellation cleared a trendline with a buy point around 327. Thus, the stock is actionable.
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The relative strength line is not at new highs, but it is near the highest level of the time in which the base formed. That's positive action. However, upside volume was light as the base formed. The Accumulation/Distribution Rating is an unconvincing C-, according to IBD Stock Checkup.
Constellation Energy stock has a 21-day average true range (ATR) of 3.55%. The average true range is a metric available on IBD's MarketSurge that gauges the characteristic breadth of a stock's behavior. Stocks with a high ATR tend to make large price moves that can trigger sell rules. Stocks with lower ATRs tend to make more incremental moves.
With the S&P 500 and Nasdaq now in a power trend, investors can buy stocks with ATRs up to 8%, though they should be wary of being too concentrated in high-octane names.
