Dynegy shares continue to fall
Dynegy (DYN) shares fell as much as 6.6% on March 22, 2017, and reached a new 52-week low of $6.67. Dynegy shares closed at $6.96 after losing 4.5% for the day.
Dynegy and other independent power producers in the US have been struggling for the last few years due to lower wholesale power prices and weak power demand. Their profits have been squeezed significantly, which led to volatile stock movements.
The above chart shows the comparative stock price performance of Dynegy and utilities (XLU) along with broader markets (SPY) (SPX-INDEX). So far, Dynegy has corrected nearly 15% this year. NRG Energy (NRG), its large peer and the biggest merchant power player, rose 50% during the same period. NRG Energy shares witnessed an enormous rise after activists’ involvement in the company hinted at possible positive changes and unlocking value to shareholders.
Over the past year, the Utilities Select Sector SPDR (XLU) has risen more than 7%, while Dynegy fell nearly 50%. SPY rose 15% during the same period.
Volatility compared to peers
Merchant stocks’ volatile stock price movements make them relatively risky. Dynegy’s beta is above 1.6, while NRG Energy and Calpine have betas around 1.2. On the other hand, utilities generally have betas below 0.5. Relatively low volatility stocks like Southern Company (SO) and Duke Energy (DUK) generally provide more stable returns.