In a report released today, David Arcaro from Morgan Stanley maintained a Buy rating on Talen Energy Corp (TLN – Research Report), with a price target of $300.00.
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David Arcaro has given his Buy rating due to a combination of factors, primarily centered around Talen Energy Corp’s recent upsizing of their contract with Amazon Web Services. This new agreement significantly increases the contracted capacity from the Susquehanna nuclear plant, doubling it to 1,920 MW by 2032, and transitions to a front-of-the-meter arrangement that bypasses regulatory approval. This strategic move allows Talen Energy to secure premium pricing for nearly the entire output of its nuclear plant through at least 2042, with benefits such as a creditworthy counterparty, reduced market exposure, and price escalation, all contributing to higher free cash flow and justifying a higher EBITDA and valuation multiple.
Furthermore, Arcaro highlights additional growth opportunities for Talen Energy, including the potential to contract its gas plants, which could add significant value in a bullish scenario. The company also stands to benefit from rising power prices in the PJM market and potential improvements in credit ratings, which could lead to substantially higher free cash flow and returns of capital to investors. These factors collectively underpin Arcaro’s decision to raise the price target to $300 from $243 and maintain an overweight position on the stock.
In another report released on June 3, Bank of America Securities also reiterated a Buy rating on the stock with a $280.00 price target.