American Electric Power (NASDAQ:AEP) is starting 2026 with a clear signal that its growth ambitions are moving from planning to execution. The utility just disclosed that one of its units will move forward with a $2.65 billion purchase of solid oxide fuel cells, exercising a substantial portion of an option it secured last year under a broader agreement with Bloom Energy. Under that 2024 deal, AEP committed to 100 megawatts of fuel cells with the option to acquire up to 900 additional megawatts. That option is now being put to work.
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The fuel cells will support a new power generation facility near Cheyenne, Wyoming, and AEP has already lined up a 20-year offtake agreement with an unnamed customer for the plant’s entire output. Importantly, if certain conditions tied to the offtake are not satisfied by the second quarter of 2026, AEP will be financially compensated for all capital and costs incurred.
The deal fits into a broader investment narrative that Siebert Williams analyst Christopher Ellinghaus believes the market still underappreciates. In his view, AEP’s valuation reflects a disconnect between the company’s accelerating growth profile and how investors are currently pricing the stock. As he puts it, AEP shares have room to narrow “the relative growth valuation gap” versus the broader electric utility group.
Ellinghaus argues that AEP is benefiting from what he describes as a “renaissance” driven by “rekindled regulated electricity demand growth and the qualities of AEP’s electric service areas.” That demand backdrop, combined with the company’s expanding capital plan, has pushed AEP’s growth trajectory meaningfully higher. Capital spending is now set to exceed $80 billion through 2030, with more than $21 billion of electric generation investment and $30 billion in transmission planned over the next five years alone.
Crucially, Ellinghaus believes those investments are translating into faster earnings growth. The analyst notes that AEP’s EPS growth expectations have accelerated to the high end of the electric utility group, with growth now approaching 9%, a level he views as well above what the market is currently discounting.
From a valuation perspective, Ellinghaus sees the current multiples as unusually compressed given that backdrop. The analyst points out that utility stocks broadly are still trading at a meaningful discount to historical norms, even as fundamentals have improved, calling the current setup an opportunity rather than a warning sign.
Taken together, Ellinghaus assigns AEP shares a Buy rating and a $137 price target, which implies about 20% upside from current levels. (To watch Ellinghaus’ track record, click here)
Across the rest of Wall Street, enthusiasm is more balanced. With 8 Buys, 7 Holds, and 1 Sell, AEP carries a Moderate Buy consensus rating. The $127.87 average price target suggests about 12% upside for the next 12 months. (See AEP stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.