Why Vistra Stock Jumped 28% in November

Shares of Vistra (NYSE: VST), recognized as one of the top-performing stocks on the S&P 500 index this year, saw significant gains in November. This surge was largely driven by investors’ enthusiastic reactions following its earnings report and the overall positive sentiment in the market after the U.S. presidential election.

According to data from S&P Global Market Intelligence, the stock concluded the month with a remarkable increase of 28%. The stock experienced a decline early in the month, which it eventually overcame to report strong overall gains.

Vistra's Gains Continue

This lesser-known utility stock has garnered increased interest this year, as many investors are optimistic about its prospects amid the ongoing AI boom. New data centers, which require substantial amounts of power, are expected to emerge, and unregulated utilities like Vistra are in an ideal position to benefit from this trend.

However, the month started poorly for Vistra, as its stock price dipped when a regulatory body rejected a deal between Amazon and Talen Energy related to a data center in Pennsylvania. This news led to a sell-off affecting several stocks in the sector, including Vistra. Yet, analysts at Morgan Stanley considered this downturn an “excellent buying opportunity.”

Following the election, Vistra's stock rebounded, rising by 3.4%. The stock continued to climb, surging by another 7% after the company released its better-than-expected third-quarter earnings report.

In its earnings report, Vistra announced revenue of $6.29 billion, marking a 54% increase compared to the same period the previous year. This exceeded the market's expectations of around $5.01 billion. However, a closer look at its financial results revealed that adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased from $1.61 billion to $1.44 billion. This decline was primarily attributed to lower pricing for electricity during the summer months in Texas and increased supply costs.

Moreover, Vistra provided guidance indicating a steady rise in EBITDA through 2026, projecting earnings of $5 billion in 2024, increasing to between $5.5 billion and $6.1 billion in 2025, and surpassing $6 billion by 2026.

What's Next for Vistra

Looking ahead, Vistra is expected to be influenced significantly by the broader AI industry as much of its current valuation hinges on anticipated growth within this sector. This includes potential advantages from nuclear production tax credits, as investments in nuclear energy as a power source for future data centers are anticipated to grow.

Even without substantial advances in nuclear energy, Vistra is likely to benefit from the rising demand for electricity driven by AI expansion. The stock's impressive rise throughout the year is closely tied to this overarching narrative surrounding AI.

Note: John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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