Constellation Energy Corporation (CEG): A Bull Case Theory

We came across a bullish thesis on Constellation Energy Corporation on X.com by @TheValueist. In this article, we will summarize the bulls’ thesis on CEG. Constellation Energy Corporation's share was trading at $365.63 as of December 16th. CEG’s trailing and forward P/E were 41.88 and 32.47 respectively according to Yahoo Finance.

Constellation Energy is a large-scale competitive power generator with a strategic advantage anchored in the U.S.’s largest nuclear fleet, complemented by commercial/retail platforms and a pending expansion via the Calpine acquisition. Its asset base is concentrated in tightening markets such as PJM, New York, and the Midwest, benefiting from scarcity rents, elevated capacity prices, and demand-driven premiums for firm, carbon-free energy.

Earnings are bifurcated: stable nuclear economics with downside protection via federal 45U production tax credits and state clean energy incentives, and merchant upside through capacity revenues, energy margins, and long-duration PPAs. High nuclear fleet reliability—96.8% capacity factor excluding Salem and STP—translates directly into margin capture and credibility with hyperscaler buyers underwriting AI and data-center load.

Q3 2025 results highlight strong operational execution, with GAAP EPS of $2.97 and adjusted operating EPS of $3.04; PTC revenues declined due to higher gross receipts, functioning now more as downside insurance. Policy support, including extended 45U/45Y credits and tax depreciation provisions, improves structural free cash flow, aiding deleveraging, capital returns, and uprates/restarts. PJM capacity auctions and long-duration hyperscaler PPAs (Microsoft, Meta) reinforce contracting optionality. Uprates, restarts, and the Crane restart offer high-return, low-capex growth.

Management quality is above average, with a clear division of labor: Dominguez (CEO) orchestrates regulatory, policy, and strategic execution; Hanson (generation) ensures nuclear reliability; McHugh (commercial) captures market optimization; Eggers/Smith (finance) oversee capital discipline. Incentive structures align annual and long-term pay with operational and financial performance, free cash flow, and credit metrics.

Key risks include nuclear operational risk, Calpine integration, regulatory shifts, and near-term contracting cadence. Alignment is reinforced via ownership guidelines, anti-hedging policies, and performance-weighted LTIPs, though PShare cash settlements may slightly reduce marginal equity exposure. Overall, Constellation is transitioning from “merchant nuclear with policy floor” to a “scarcity and contracting platform,” where execution and contracting cadence drive both free cash flow and valuation upside.

Previously we covered a bullish thesis on Constellation Energy Corporation by jackandjillonthehill in March 2025, which highlighted undervaluation, rising margins from electricity price increases, and superior ROE versus peers. The company's stock price has appreciated approximately by 67% since our coverage. The thesis still stands as nuclear baseload economics remain strong. @TheValueist shares a similar view but emphasizes strategic expansion, contracting optionality, and management execution.

Constellation Energy Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 91 hedge fund portfolios held CEG at the end of the third quarter which was 79 in the previous quarter. While we acknowledge the potential of CEG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.