In a report released yesterday, Julien Dumoulin Smith from Jefferies maintained a Buy rating on NRG Energy (NRG – Research Report), with a price target of $113.00.
Julien Dumoulin Smith has given his Buy rating due to a combination of factors surrounding NRG Energy’s strategic acquisition and financial positioning. The purchase of a 738MW gas portfolio in Texas from Rockland Capital is seen as a strategic move that enhances NRG’s retail footprint and mitigates risks in the Texas market. The acquisition is expected to generate $50-60 million in annual adjusted EBITDA from 2025 to 2028, with potential for higher earnings if market conditions improve.
Despite the high valuation of the acquisition at 7.5-10.2x EV/EBITDA, the deal is considered reasonable given the robust demand for power and the strategic benefits it brings. NRG’s decision to finance the acquisition entirely with debt maintains its equity capital allocation strategy, although it increases the company’s leverage slightly. The transaction is viewed as a small net positive, addressing critiques of NRG’s older fossil portfolio and positioning the company for future growth opportunities in the Texas and PJM markets.
In another report released on March 7, Wells Fargo also maintained a Buy rating on the stock with a $165.00 price target.
NRG’s price has also changed moderately for the past six months – from $81.040 to $90.920, which is a 12.19% increase.
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