Shares of Vistra (VST 4.64%), the unregulated utility that is the best-performing stock on the S&P 500 index this year, were having another winning month in November as investors reacted to its earnings report, and it benefited from the market’s positive response to the U.S. presidential election.
According to data from S&P Global Market Intelligence, the stock finished the month up 28%. As you can see from the chart below, the stock overcame a sell-off early in the month to deliver strong gains.
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Vistra’s gains continue
Enthusiasm for the little-known utility stock has mounted this year; investors see it as a winner in the AI boom as new data centers are expected to have huge power needs and unregulated utilities like Vistra are best positioned to capitalize on that.
The stock started off November on a downswing, falling after a regulator rejected an agreement between Amazon and Talen Energy regarding a data center in Pennsylvania. A number of sector stocks, including Vistra, fell on the news. However, Morgan Stanley called it an “excellent buying opportunity.”
Later that week, the stock climbed 3.4% after the election and then jumped 7% the following day as the company delivered better-than-expected results in its third-quarter earnings report.
The company reported revenue of $6.29 billion, up 54% from the quarter a year ago and much better than the consensus of $5.01 billion. However, the bottom line tends to be a better reflection of its performance given the nature of its business. On that account, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell from $1.61 billion to $1.44 billion due to less summer scarcity pricing in Texas and higher supply costs. It also gave guidance calling for EBITDA to steadily rise through 2026 from $5 billion to $5.2 billion in 2024 to $5.5 billion-$6.1 billion in 2025 to more than $6 billion in 2026.
Image source: Getty Images.
What’s next for Vistra
Vistra seems likely to trend with the broader AI sector for the foreseeable future as much of the value in the stock is tied to hopes for AI; this includes potential benefits from the nuclear production tax credit as bets on nuclear energy as a source of power for data centers have increased.
Even without a nuclear breakthrough, Vistra should benefit from the increasing demand for power as the AI expansion ramps up, but the stock’s surge this year owes to the overarching AI narrative.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
