CEG's Stock Underperformance Reflects Valuation Strain Despite New Data Center Deal

What happened

Constellation Energy's stock has underperformed its industry peers over the past month, driven by investor apprehension over its premium valuation multiples like a P/E of 33.3x. The company continues to tout its nuclear-powered, carbon-free growth, recently securing a new 380-MW data center deal to capitalize on AI-driven power demand. However, the DeepValue report reveals that near-term earnings are mechanically exposed to volatile policy credits, with the 45U nuclear PTC contributing ~$2,080 million to 2024 revenues and facing potential compression. Critical gating items include the execution of DOJ-mandated divestitures from the Calpine acquisition, which closed in January 2026, and regulatory risks around PJM/FERC rules for large-load contracting. Investors are thus balancing long-term growth narratives against immediate execution hurdles and a crowded market sentiment that leaves little margin for error.

Implication

The stock's recent underperformance signals market skepticism about CEG's ability to swiftly monetize its AI power narrative amidst premium pricing. While the new data center deal supports the growth story, it does not address core vulnerabilities like the sensitivity of earnings to 45U PTC changes or the economic leakage from forced asset sales. With a P/E of 33.3x and EV/EBITDA of 13.8x, the equity embeds optimistic assumptions, offering no margin of safety if integration stumbles or regulatory headwinds intensify. Key catalysts to monitor include the pricing and timing of six gas plant divestitures, post-Calpine integration metrics, and FERC/PJM rulemaking on co-located loads. Until these observable inputs reduce uncertainty, staying sidelined is prudent to avoid overpaying for execution risk and policy-dependent cash flows.

Thesis delta

The new 380-MW data center deal reinforces CEG's strategic focus on AI-driven demand but does not materially shift the investment thesis. The core delta remains the transition from regulatory approval to execution post-Calpine closure, with divestiture economics and 45U PTC durability as primary swing factors. Investors should prioritize monitoring these catalysts over incremental deal flow, as the valuation already prices in smooth conversion narratives without adequate risk adjustment.