Zacks Comparison Reiterates CEG's AI Narrative, But DeepValue Report Highlights Valuation and Execution Risks

What happened

Zacks Investment Research published a comparison of Constellation Energy and American Electric Power, focusing on nuclear scale and clean power demand from data centers and EVs, which echoes the crowded market narrative. DeepValue's master report assigns a WAIT rating to CEG, noting that at $312.64, the stock prices in high AI demand expectations with elevated valuations like a P/E of 42.2x. The report emphasizes significant earnings volatility from derivatives and Level-3 valuations, as management admits these can materially swing GAAP results. Key near-term catalysts include the March 31, 2026 guidance call and proof of Calpine integration success, such as securing over 500 MW of new contracted load. Without improved visibility or reduced merchant exposure, downside risks loom from regulatory pressures in PJM and potential contract execution delays.

Implication

The comparative analysis adds no new fundamental insights, merely reinforcing the widely held view that CEG benefits from AI-driven power demand, which is already reflected in its premium valuation. DeepValue's detailed assessment shows no margin of safety at current prices, with earnings vulnerable to swings from commodity derivatives and Level-3 marks, as evidenced in recent filings. Investors must watch the March 31, 2026 guidance closely; failure to quantify Calpine synergies or announce new contracts could break the thesis and lead to a re-rating. Regulatory headwinds, such as PJM capacity price caps that have already hit ceilings, could constrain upside even if demand grows, adding to the risk profile. Therefore, a prudent approach is to wait for either a price pullback toward $270 or concrete evidence from management on contracting and integration before considering an entry.

Thesis delta

The Zacks article does not alter the core investment thesis; it merely reinforces the existing market sentiment without introducing new data or shifting fundamentals. The thesis remains unchanged: CEG's valuation is stretched and hinges on execution milestones like the March 31 guidance and additional contracting wins. Any potential shift depends on these upcoming catalysts, which could either validate the AI narrative or expose underlying volatility and regulatory constraints.