Why Vistra Stock Experienced a 28% Surge in November

In November, shares of Vistra (VST 4.64%), an unregulated utility company, witnessed a remarkable increase, becoming the best-performing stock on the S&P 500 index this year. This growth can be attributed to positive investor reactions following its earnings report and the favorable market response to the recent U.S. presidential election.

According to data from S&P Global Market Intelligence, Vistra's stock closed the month up by 28%. The stock managed to recover notably after an early-month sell-off.

Continuing Gains for Vistra

Investor enthusiasm for Vistra has grown throughout the year. Many feel it is positioned to benefit from the AI boom due to the expected power needs of new data centers. As an unregulated utility, Vistra is particularly well-suited to take advantage of this emerging demand.

November began on a downward trend for the stock, dipping after a regulatory body turned down a deal between Amazon and Talen Energy concerning a data center in Pennsylvania. Following this news, a number of utility stocks, Vistra included, experienced declines. However, analysts at Morgan Stanley deemed it an "excellent buying opportunity."

In the following days, Vistra's stock rose by 3.4% after the election outcome was revealed and surged by another 7% when the company announced strong third-quarter earnings that surpassed expectations.

During this earnings report, Vistra reported revenues of $6.29 billion, which is a 54% increase compared to the same quarter last year. This figure exceeded the consensus estimate of $5.01 billion. While revenue is significant, many investors focus more on adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) as a measure of performance. For this quarter, adjusted EBITDA decreased from $1.61 billion to $1.44 billion, attributed to lower summer scarcity pricing in Texas and increased supply costs. Despite this, the company provided positive guidance, forecasting EBITDA growth to continue through 2026 - increasing from $5 billion in the past year to projections of $5.2 billion in 2024, $5.5 billion to $6.1 billion in 2025, and over $6 billion by 2026.

The Future for Vistra

Vistra is likely to follow the broader trends within the AI sector in the upcoming months, as a significant portion of its value is linked to expectations surrounding AI. This includes potential advantages from the nuclear production tax credit, as interest in nuclear energy as a reliable power source for data centers grows.

Even in the absence of major breakthroughs in nuclear technology, Vistra stands to gain from the rising electricity demand driven by the expansion of AI-driven data needs. The stock's impressive performance this year has largely been fueled by the overarching narrative surrounding artificial intelligence.

Vistra, Stock, Earnings