By coinnews 
00:00 Speaker A
Well, NRG Energy at the top of the leaderboard is the best performer in the S&P 500 so far this year. The Texas energy giant up about 73% year to date, and the company recently announced a $12 billion deal to acquire power generation assets from LS Power. Here with more on this data center play, let’s get to Jeffries’s managing director, Julian DuMoulin Smith, who’s joining us now to discuss. Julian, and it’s funny we were just talking about meta because obviously one of the things that has driven NRG and a lot of other power plays has been this thirst for power to fuel data centers. But energy has overtaken them this year. What in your view has been the big catalyst or catalysts for that outperformance?
02:06 Julian DuMoulin Smith
Yeah, um and and thanks so much for the time. Look, I think in summary, if I were to put it in a nutshell, you’ve got three or four factors, but really it’s the data center factor that’s driving the outperformance here. Look, I use NRG as a tortoise versus hare, right? I mean, you’ve got a lot of other power companies, utility companies that worked very well 2024, very much in vogue. This company has been very nimble in articulating its plans with respect to data centers. It’s really started to bore some fruit just so far this year. So, when you think about um the expectations and the update that was announced even just earlier this week, it wasn’t just the LS power acquisition. It was also a slew of different data points about how the company is positioned around data centers, further progress delineating milestones through the course of the year. So, I think it was half a reaction to an accretive transaction, but also equally so a very favorable update on some of the data center activities that they’re looking to do in partnership with new construction with GE renova on building out several new power plants through the decade.
04:28 Speaker B
Can I just ask you, the move in this stock is remarkable. I mean, Palantir like, right? It’s it’s up nearly 75% this year already. But I know you, when you talk to your clients, you say this one is still a buy here. So, you obviously would argue valuation still very attractive.
05:06 Julian DuMoulin Smith
Yeah, I mean, look, I I use the tortoise versus hair. People wanted to go for, you know, much more uh financially and operationally geared companies last year. This company didn’t get as much of people’s attention. They were perceived as a non-power company. They had they’ve got some diversification in other segments, such that really this was not the go-to data center stock uh that many people had perceived it to be up until the last few months. I mean, I remember when we upgraded the stock back in the fall, people thought we were a little off in terms of why why would you get involved with this thing for data center construction? Yet, they have some of the soonest CODs and services for some of their gas plant construction out there, um uh relative to their IPP peers. A, and then B, look, I think just when you look at estimates and estimate revisions, this company has probably some of the most tangible potential out there, especially relative to some of these other power companies, right? If you want exposure to this sector, you know, they just said they’re at a 14 plus percent EPS. That guidance is going to head higher. Our numbers are at 16% plus EPS growth through the decade. You don’t get that with many other stocks, not to mention at this valuation. I mean, you know, up until the last few days, the stock was at a significant discount relative to this kind of growth rate. And more to the point, street numbers have been obviously too low for a while. And I I still think, you know, even today as people internalize this transaction, numbers are going to continue to head higher. Management, I think as soon as 2Q could be talking about revising up their full year 25 guidance. As soon as 3Q, we could be talking about revising the long-term guidance even further. They left some clues on the last call. Look, I don’t think this is just a one-trick pony like data centers. And more to the point, you own the stock for a flurry of different data points that are going to materialize almost with a specific quarterly cadence through the entire year.
08:12 Speaker A
Julian, I’m curious when it comes to the data centers. We have had sort of a a trickle of deals, not yet a flood of deals between some of these power operators and large tech. And of course, the most high profile one, Microsoft and the the restarted reactor plan for Three Mile Island. So, do we expect those kinds of what they call front of the meter deals, the unregulated deals um with a company like NRG and and big technology? Sort of what like we’ve been kind of waiting for more of those to come, right?
09:20 Julian DuMoulin Smith
Yeah, no, absolutely. I mean, I think we still are. I mean, we’re waiting across both the power companies and utility companies through the course of this year to see some of those data points transpire. Uh this summer is going to be a crucial moment. Look, we’ve seen a steady slew of them. Admittedly perhaps not in the exact permutation as you allude to, but I think the street’s been very keen to, right, and perhaps not as concentrated with select counterparties as the street’s keen to see. Rather, we’ve seen a little bit more of diversification, perhaps more so in some of the regulated markets than even with the power companies. But this company in particular, you know, I think expectations have been very low up until very much of late. And that’s what’s sort of interesting for this company. This has been a sort of the dark horse, if you will. And that’s that’s why I think there’s been such an acute move higher in the stock. This is something of a catchup. That’s why I don’t turn my head and I’m like, look, don’t you know, don’t don’t be too nervous here. This is just following the leader of of the other companies that clearly reflect even more pro forma data center expectations than this stock does after its latest run. That’s what’s important to keep in mind here.