Buy This, Not That: This Nuclear Energy Provider Is Ready to Radiate Profits

Shah Gilani|November 6, 2024

During his campaign, now-President Trump threw his support behind nuclear energy as one way to rein in energy costs…

But two headline-making nuclear companies took a hit after the Nuclear Regulatory Commission’s pushed back on the deals they’ve made with Big Tech.

Here’s a twist: one of these stocks isn’t just surviving the fallout, it’s positioning for impressive growth in a new Trump era.

With better profit margins, a stronger balance sheet, and a smaller market cap, my pick might surprise you.

Find out which nuclear player is primed for profit and which one you should pass on… at least for now.

Get the details in my latest Buy This, Not That episode.

Click on the thumbnail to dive in.

TRANSCRIPT

Shah Gilani here with your weekly BTNT, as in Buy This, Not That. It’s Wednesday morning when I’m recording this for you. We have a new president. Nothing contested so far. Kamala Harris has not conceded yet, but probably will.

Markets love it. Equity markets love it. The Trump Bump is in full force, except for the bond market. It hates what it thinks is going to happen, and that’s understandable.

But I’m not here to talk about that.

A lot of you know I like Constellation Energy (CEG). But is it still a buy relative to the news that its competitor Talen Energy (TLN) got spanked… and so did Constellation?

So your BTNT today isn’t about anything to do with the Trump Bump or any of the stocks that are flying on account of that, which is pretty much all of them.

It’s about Constellation Energy versus Talen Energy. Two nuclear-fired energy companies.

I bring up nuclear because Talen and Constellation both have fossil fuels. They also have other sources that power their energy output.

Constellation is a BUY – I said it was a BUY – because of the deal that it has with Microsoft. Amazon tried to make a deal with Talen that it would buy Talen’s output from its Susquehanna nuclear plant. And Amazon actually bought property for a data center campus right next to Talen’s Susquehanna plant.

The problem there is the Nuclear Regulatory Commission pushed back on Talen and said, no, you can’t take power from the grid and give it to an exclusive customer because you get a good deal. You have a certain amount of revenue coming from the grid that’s guaranteed, so you can’t take away from the grid.

Constellation got hit on that news. It was down about 11% on that news, while Talen was down around 2.5%.

That brings both of them into question. I’m here to tell you that one’s a BUY and one’s NOT a buy, and one’s a better BUY than the other.

I’m going to surprise you and tell you it’s not Constellation.

Constellation has a nice move ahead of a gap that it’s close to filling. And then it can go higher. But overall, Talen Energy is a better play.

Let’s look at Constellation first since that’s what’s on my screen. Here’s the problem right here. Bang. Great news. Going to reopen Three Mile Island. Going to sell all of the output there to Microsoft. Rah rah. Boom.

Great deal. Nobody said or considered whether or not the Nuclear Regulatory Commission or the powers that be would think that was a good idea or what would it do… Because it didn’t really seem to impact the grid since Three Mile Island has been off. It’s been down for years.

They want to bring it back. So the question didn’t really arise. But with Talen, which is providing power to the grid, it immediately came up. And the question was, wait a second… If you’re going to sell power to Amazon, you’re taking that out of the grid. What about the regular customers?

Now, Talen Energy is having a nice day. But then again, so is everything. It’s a better looking chart.

Yes, I like Constellation, but because a lot of you asked me about Constellation versus Talen, I’m going to go with Talen. Yes, Constellation is fine, but I would not buy Constellation.

Given the choice between the two, and that’s what BTNT is about, I would buy Talen over Constellation.

Why? Because I like this chart a lot better. It’s a smaller company. It’s got a much better profit margin, and I think the balance sheet is a lot better.

Talen Energy is the BUY and NOT Constellation. Again, if you own Constellation, I wouldn’t sell it. I think it’s going to do well. But Talen has a better profile.

With Talen, we’re talking about a $9.68 billion market cap and revenue of $2.1 billion versus Constellation’s revenue at $24 billion. Talen’s profit margin is 40%-plus. Constellation has a12% profit margin.

Talen has a very small number of shares outstanding relative to Constellation. I like that it’s a smaller cap, a tighter company with much better profit margins.

So Talen is a BUY.

Constellation, again, not that it’s NOT a buy… It’s just that given the two, I’m going to buy Talen and not Constellation. If you own it, I wouldn’t sell Constellation.

But here’s the gap I was talking about. And then this gap. I think we can come down and fill that. That’s another reason I wouldn’t necessarily buy Constellation here… because if it comes down to fill this gap and you want to try to buy it, then maybe you can buy it a lot lower.

Talen doesn’t have that problem.

This dump right here was based on the Talen news that the Nuclear Regulatory Commission said, wait a second. And the powers that be who look at the grid and said to Talen, wait a second. We don’t want you to just take power out of the grid and give it exclusively to Amazon.

So that’s what happened here. Constellation got hit on that. It’s going to be harder for Constellation to make that up and then continue higher than it is for Talen. So Talen is a better play. So BUY Talen, NOT Constellation.

There you go. Catch you guys next week.