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Broker Recommendations for NRG Energy ahead of Its 2Q16 Earnings

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Aug. 8 2016, Updated 9:04 a.m. ET

NRG Energy’s price targets

According to Wall Street analyst estimates, NRG Energy (NRG) has an estimated upside of 31% in one year with a price target of $18.14. NRG is currently trading at $13.84. Of the 15 analysts tracking NRG Energy, nine recommend a “buy,” while four recommend a “hold.” Two analysts have given the company a “sell” rating as of August 2, 2016.

The above table shows analysts’ recommendations for NRG Energy. Interestingly, two analysts have given price targets of $25, which implies an estimated upside of nearly 85% with a holding period of just one year.

As for its peers, Calpine (CPN) has an estimated upside of 38% with a price target of $18.50. It’s trading at $13.43. Dynegy (DYN) has a price target of $24.31, which implies an estimated rise of 63% from its current market price of $14.86 as of August 2, 2016.

Investors should consider the risks associated with these stocks. Unlike traditional utilities (VPU), merchant power player stocks often have a high volatility, driven by their volatile earnings.

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Outlook

Falling load growth and rising capacities, particularly at competitive prices, are likely to keep power prices sluggish. Energy demand management is expected to increase during peak demand periods, thereby dragging independent power producers’ profits.

In the absence of a growth in power demand, an increasing supply of power may not bode well for merchant power players. Thus, the current bleak picture for these players may become bleaker in the near future.

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