While artificial intelligence is all the rage these days, investors need to think about the darker side of this narrative, which brings us to energy stocks to buy. You didn’t think that AI is “free,” did you?
According to The Washington Post, the blistering demand for various digital innovations is sapping America’s power infrastructure. The news agency wrote that the country’s 2,700 data centers have sapped more than 4% of the national electricity output in 2022. If this trend continues, the energy consumed would be equal to major world powers.
I’m not saying that we should abandon AI projects. However, the power necessary to undergird these initiatives must come from somewhere. On that note, below are relevant energy stocks to buy.
NextEra Energy (NEE)
Based in Juno Beach, Florida, NextEra Energy (NYSE:NEE) falls under the regulated electric space. Per its public profile, NextEra generates electricity through wind, solar, nuclear, natural gas, and other clean energy projects. “It also develops, constructs, and operates long-term contracted assets that consist of clean energy solutions, such as renewable generation facilities, battery storage projects, and electric transmission facilities.”
Over the past few years, NEE stock admittedly has been choppy. As well, economic concerns tied to inflation and high borrowing costs hurt sentiment throughout 2023. However, it’s been screaming higher in recent sessions. Financially, in the trailing 12 months (TTM), NextEra posted net income of $7.49 billion on revenue of $27.13 billion.
For the current fiscal year, covering experts are looking for earnings per share of $3.43 on revenue of $27.49 billion. Admittedly, that’s a bit lower than the EPS of $3.60 and sales of $28.11 billion posted one year prior. However, the high-side target calls for EPS of $3.61 with a top line of $34.3 billion. With power needs becoming more prominent, NEE is worth keeping on your radar of energy stocks to buy.
Vistra Energy (VST)
Headquartered in Irving, Texas, Vistra Energy (NYSE:VST) operates as an integrated retail electricity and power generation firm. As it relates to energy stocks to buy amid the AI power consumption crisis, Vistra is heavily involved in electricity generation. It features a broad range of infrastructure, specifically natural gas, nuclear, solar and even coal.
Granted, with the political and ideological winds blowing as they are, solutions such as coal seem rather anachronistic. However, it’s important to note that VST stock gained over 160% since the beginning of the year. That’s a testament to how much demand is coming from the myriad datacenters along with various AI applications.
Financially, Vistra posted net income of $598 million on revenue of $13.41 billion during the TTM period. On a per-share basis, the former metric comes out to $1.63. By the end of the year, analysts project that EPS may hit $5.35 on sales of $16.18 billion. If so, that would represent a big boost from last year.
Frankly, it wouldn’t be surprising if these results materialized given the AI-based demand. As a result, VST ranks among the energy stocks to buy.
Entergy (ETR)
Hailing from New Orleans, Louisiana, Entergy (NYSE:ETR) with its subsidiaries engages in the production and retail distribution of electricity. Per its corporate profile, Entergy generates, transmits, distributes and sells electric power in several regions covering Arkansas, Louisiana, Mississippi and Texas. In addition, the company distributes natural gas.
Since the beginning of the year, ETR stock has incurred some choppy trading. However, sentiment has started to pick up significant across recent sessions. Again, that’s not a surprise. AI initiatives continue to expand in scope and scale. This backdrop will almost surely drive demand. Cynically, that’s great news for Entergy.
Looking at the financials, the company posted net income of $2.12 billion on sales of $11.96 billion during the TTM period. On a per-share basis, earnings comes out to $9.98. For this year, experts believe that EPS will land at $7.29, representing a sharp 34.35% drop from 2023. However, sales could hit $12.84 billion, an improvement of nearly 6%.
Further, the blue-sky revenue target has sales reaching $14.4 billion. If you believe in this projection, ETR could be among the energy stocks to buy.
AES (AES)
Based in Arlington, Virginia, AES (NYSE:AES) falls under the diversified utilities ecosystem. Its public profile states that the company operates as a diversified power generation and utility firm, serving the U.S. and other international markets. AES owns and/or operates power plants to generate and distribute power to customers. These entities include utilities, industrial users and other intermediaries.
As one of the energy stocks to buy, AES could raise eyebrows for its use of coal. However, with various digital innovations consuming power at a breakneck pace, beggars can’t be choosers. If we want AI – and there’s no indication that we don’t – we have to pay the price of sustaining it. Cynically, then, this dynamic should keep the lights on at AES.
During the TTM period, the company posted net income of $530 million on sales of $12.51 billion. On a per-share basis, earnings came out to 73 cents. For the current fiscal year, experts believe that EPS could rise dramatically to $1.93 on sales of $12.87 billion. Further, analysts see steady expansion of the top and bottom lines into 2027.
Because of this, AES should be on your list of energy stocks to buy.
NRG Energy (NRG)
Headquartered in Houston, Texas, NRG Energy (NYSE:NRG) along with its subsidiaries operates as an energy and home services firm in the U.S. and Canada. Per its corporate profile, NRG produces and sells electricity generated from coal, oil, solar and battery storage. It also specializes in natural gas.
As with many other energy stocks to buy, NRG stock has been flying. Since the beginning of January, shares gained just over 58% of equity value. It’s difficult imagine over the long run this narrative reversing to the downside. Again, with digital innovations consuming vast amounts of energy, NRG should be in prime position to benefit.
In the TTM period, the company posted net income of $530 million on sales of $12.51 billion. Earnings on a per share basis came out to 73 cents. For this year, analysts believe that EPS could land at $1.93, a big step up from last year’s print of 35 cents. Sales growth would be more modest at 1.57%. However, the blue-sky sales target also calls for $13.7 billion.
That might actually pan out based on present developments. Either way, NRG is one of the energy stocks to buy.
Cameco (CCJ)
Based in Canada, Cameco (NYSE:CCJ) provides uranium for the generation of electricity. As such, CCJ will likely always carry some controversy when it comes to energy stocks to buy. At the same time, investors can’t ignore the enormous potential of nuclear fuel. According to the Nuclear Energy Institute, “[o]ne uranium fuel pellet creates as much energy as one ton of coal, 149 gallons of oil or 17,000 cubic feet of natural gas.”
Stated differently, I don’t think it’s possible to have a discussion about energy stocks to buy in the post-AI paradigm without mentioning nuclear fuel. With so much energy density, nuclear powerplants can address the enormous consumption of datacenters and AI protocols. CCJ stock is up 32% and I don’t think it’s any coincidence. Yes, there are global supply issues. However, with AI, there are also demand issues, as in too much demand.
For 2024, analysts are looking for EPS to reach $1.93 on sales of $12.87 billion. While that’s modest growth on the top line, the bottom line represents expansion of 452.82%. It’s also a credible projection given the fundamentals.
Ormat Technologies (ORA)
An intriguing idea for energy stocks to buy, Ormat Technologies (NYSE:ORA) falls under the utilities sector, specifically the renewables segment. The Reno, Nevada-based enterprise engages in the geothermal projects. This process involves extracting heat energy from the earth’s core. In addition, it’s also involved in the recovered energy power business.
Right now, geothermal facilities account for only half a percent of renewables-based installed capacity for electricity generation. That doesn’t sound like much because it’s not. However, the paradigm is likely shifting. With data centers and other technological platforms consuming power at an alarming rate, we need all the energy we can get. Over time, geothermal may become a more prominent solution.
Over the TTM period, Ormat posted net income of just under $134 million on revenue of $868.36 million. Earnings on a per share basis came out to $2.22. For this year, EPS may slip 1.23% to $2.05 on sales of $901.32 million. By 2025, however, EPS could rise to $2.49 with the top line reaching $991.51 million. With that in mind, ORA deserves to be on your list of energy stocks to buy.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
