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Will NRG Energy’s Transformation Plan Lead to Growth?

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Analyst price targets

According to Wall Street analysts, NRG Energy (NRG) stock has a mean price target of $30.89 against its current market price of $25.97, which indicates a potential upside of 19% going forward.

Among the total nine analysts tracking NRG Energy, four analysts rate the stock as a “strong buy,” while four recommend it as a “buy.” One analyst rates NRG Energy stock as a “hold.” None of the analysts currently rate the stock as a “sell” as of November 3, 2017.

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Outlook

NRG Energy stock has indeed delighted investors this year, but fundamentally, the largest merchant power producer still seems to be struggling. Even though the execution of the transformation plan appears to have started, its impact on earnings might take time.

Currently, NRG Energy generates its earnings from diversified operations primarily from merchant generation, retail, renewables, and NRG Yield. After divesting its renewables and yieldco businesses, exposure to merchant generation will likely increase, which could make the company even riskier.

Peer price targets

Dynegy (DYN) has a mean price target of $12.39, implying an estimated rise of 1% going forward. It’s currently trading at $12.25. Deutsche Bank raised its outlook on Dynegy from “sell” to “hold” on October 31, 2017. It has given Dynegy a price target of $12.50 from $7.0 earlier. Vistra Energy (VST) announced its agreement to buy Dynegy this week.

Calpine (CPN) has a mean price target of $15.0 against its current market price of $14.97, which indicates a flat movement from CPN going forward.

You can read more about US utilities (XLU) (VPU) and how the industry works in Market Realist’s series Powering Up: All You Need to Know about Utilities.

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