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NextEra Stock Double-Tops Despite Strong Energy Demand

Writer's picture: Chris Chris

NextEra Energy
NextEra Energy

NextEra Energy (NEE) is the biggest utility company in the world by market cap. It is a power company with a market cap of over $170 billion and is the biggest producer of renewable energy globally. 


The firm has grown this much both organically and through mergers and acquisitions (M&A). For example, it acquired Gulf Power, a leading player in the energy sector in Florida. 


Its Florida Power business has about 90,000 circuit miles of transmission and distribution lines and 885 substations. It uses this infrastructure to supply power to 12 million people in the state. Most of its customers are in the residential sector followed by corporates.


NextEra Energy’s business has done well in the past few years as its annual revenue jumped from $19.2 billion in 2019 to $28.1 billion last year. This growth will likely continue in the coming years as power demand continues rising, especially because of the strong data center demand. 


NextEra’s stock has risen by 45% in the last twelve months and by 215% in the last decade. It was trading at $82.87 on Oct. 29, while the HypeIndex metric rose to 134%.


NextEra HypeIndex
NextEra HypeIndex

Positive hype


  • NextEra and other utility companies are seeing strong energy demand because of increased data center investments. For example, companies like Amazon, Google, and Microsoft have all announced large energy partnerships. 


  • The company published strong financial results and forward guidance. Its revenue rose to $7.56 billion, most of which came from its Florida Power business. Also, its operating profit jumped to $2.8 billion, while its net profit jumped to $1.5 billion. 


  • Analysts believe that NEE has room to grow its earnings per share in the future as it continues to focus on profitable growth.


  • The average revenue estimate for the fourth quarter revenue is $7.3 billion, a 7.3% increase from the same period last year. While its annual revenue is expected to drop to $27.2 billion this year, there is optimism that its revenue for 2025 will rebound to $29.6 billion. 


  • NextEra Energy is one of the top dividend aristocrats that has boosted its payouts for 28 years. It has a dividend payout ratio of 58%, meaning that it has more room to grow its returns in the future. It has a dividend yield of 2.50%.


  • The company has seen substantial energy demand such that the management is raising $1.5 billion to fund new energy projects. In its recent results, it noted that it had a 24 GW backlog.


  • Analysts expect that the NEE share price should be valued at $90, which is a few points higher than the current $82.87.


  • NextEra is a high-margin company, with a gross profit margin of 62.1% and a net income margin of 26%.


Negative hype


  • NextEra seems like it is an overvalued company because it has a price-to-earnings multiple of 23.93, higher than the industry median of 18.6. It also has a forward EV to EBITDA ratio of 27, higher than the median of 19.4.


  • These valuation metrics are stretched, especially for a company that is no longer growing as it used to before. 


  • NextEra is facing some competition from upcoming energy companies like Oklo and NuScale Power, and TerraPower that are building modular nuclear power plants.


  • NextEra has a substantial amount of debt, with its long-term debt being $66 billion and $10 billion of deferred liabilities. 


NextEra Energy stock analysis


NextEra Energy Stock
NextEra Energy Stock

The daily chart shows that the NextEra share price has risen from $45.7 in 2023 to $86 in September. It has remained above the 50-day and 100-day Exponential Moving Averages (EMA), which is a positive sign.


The stock has, however, formed a double-top chart pattern at $86. In most periods, this is one of the most popular bearish signs in the market. Therefore, a move above the key resistance point at $86 will invalidate the bearish view. 


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HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.

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