Vistra Earnings Strengthen the AI Power Thesis but Valuation Caps the Upside
Summary
I downgrade Vistra froma STRONG BUY to a HOLD. The business case is better than it was in May, but the base-case return is just below 10% and does not compensate enough for commodity, financing, and integration risk. Q2 adjusted EBITDA increased 31% to $1.767Bn, while GAAP revenue declined 5.5% to $4.017Bn and GAAP diluted EPS slipped to $0.76 because hedge marks obscured stronger realized generation economics.
The thesis strengthened on nuclear scarcity, PJM pricing, fleet reliability, Helix, and DOE financing support. It weakened on softer ERCOT forwards and the amount of capital required to execute the growth plan.
My base case values Vistra at $171 today using 10.0x 2027 EBITDA of $8.3Bn, $19.1Bn of year-end 2027 net debt, 334Mn diluted shares, and a 10% discount rate.
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