Citi Research upgraded Constellation Energy (CEG) to Buy from Neutral last Wednesday, citing “select opportunities” and the company’s pending acquisition of Calpine Power.
The analysts, led by Ryan Levine, also lowered their price target to $232 from $334. “We think the $232 valuation is achievable without any behind-the-meter deals or unannounced growth,” Citi wrote.
Constellation is America’s largest producer of carbon-free energy in the U.S.
The company is also integrating artificial intelligence across its operations, particularly in the nuclear sector. According to Citi, any shift in AI-related policy bodes well for CEG stock.
However, the bank also warned that if Constellation fails to secure any co-location data center deals, the stock could drop to $181.
CEG shares jumped 16% on Wednesday, outperforming the broader market during a historic rally following President Trump’s suspension of his sweeping tariff plan. Still, the stock remains down nearly 10% year-to-date.
What led to Citi upgrade
Citi’s revised outlook reflects Constellation’s pending acquisition of Calpine Power.
Announced in January, the deal is a cash-and-stock transaction worth approximately $16.4 billion, consisting of 50 million Constellation shares and $4.5 billion in cash. The company would also take on roughly $12.7 billion in Calpine’s net debt.
The deal is currently under review by the U.S. Federal Energy Regulatory Commission (FERC).
Consumer groups have pushed back, warning that the merger could give Constellation an outsized share of the energy market.
According to Reuters, advocates in Maryland and Pennsylvania filed formal protests with FERC, arguing the deal would hurt competition and lead to higher energy bills.
“The merger would incentivize and facilitate the surviving company’s opportunities for anticompetitive conduct, such as the withholding of supply, given the fleet changes post-merger and the supply and demand conditions in the generation and capacity markets,” the Maryland Office of People's Counsel wrote in a March filing.
Environmental groups have also raised concerns about the merger, Reuters reported.
Constellation President and CEO Joe Dominguez defended the deal, saying the combined companies would create the nation’s largest clean-energy provider.
“It will help us better serve our customers across America, from families to businesses and utilities [by offering] the broadest array of energy products and services available in the industry,” Dominguez said.
Citi also noted that Constellation would owe a $500 million breakup fee if it walks away from the deal.
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