Constellation Energy (CEG) is back in focus after securing long-term power purchase agreements with Microsoft and Meta, directly linking its carbon-free nuclear fleet to AI and data center power needs.

Despite the recent agreements, the share price has been choppy, with a 1-month share price return of 5.95% offset by a 90-day decline of 16.42%. However, the 1-year total shareholder return of 40.54% and the 3-year total shareholder return of around 4x indicate that momentum has been strong over a longer horizon.

If you are looking beyond utilities tied to AI demand, this is a good moment to broaden your search and check out 87 nuclear energy infrastructure stocks

With Constellation trading at US$305.58, carrying a premium-style P/E multiple and sitting at roughly a 7% intrinsic discount and about 29% below analyst targets, is there still a buying opportunity here, or is the market already pricing in future growth?

Most Popular Narrative: 33% Undervalued

According to Vestra, the most followed narrative sees Constellation’s fair value at $456.30 versus the last close at $305.58, with AI linked nuclear demand doing the heavy lifting in that gap.

The fair value for Constellation Energy (CEG) is calculated by applying a 35.1x Fair P/E multiple to the 2027 consensus earnings estimate of $13.00 per share. This multiple reflects the "AI premium" typically reserved for software firms, justified by Constellation's status as a pure-play provider of carbon-free, baseload power in an era of unprecedented electricity demand.

Curious what kind of earnings profile justifies a multiple usually seen in software, not utilities? The narrative leans heavily on future profitability, hyperscaler contracts, and long duration cash flows.

Result: Fair Value of $456.30 (UNDERVALUED)

However, this hinges on AI power demand staying resilient and on nuclear friendly regulation; any slowdown in data center build outs or policy shifts could quickly challenge that optimism.

Another View: Multiples Send A Caution Flag

The user narrative leans on a rich earnings multiple, but the current P/E of 47.7x is more than double the US Electric Utilities average of 21.7x and well above a fair ratio of 34.7x. That gap points to higher valuation risk. Is the premium fully earned or stretched?

For a closer look at how this compares across peers and where the ratio could settle over time, check out See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Mixed signals on value and risk so far? Take a moment to review the underlying data yourself and move quickly to form a view that is based on 3 key rewards and 3 important warning signs.

Looking for more investment ideas?

If Constellation has your attention, do not stop here; broaden your watchlist with other focused ideas that could fit different roles in your portfolio.

• Target reliable income by reviewing companies in the 15 dividend fortresses that may suit a yield focused approach.
• Hunt for potential mispriced opportunities with the 47 high quality undervalued stocks that highlight companies combining quality fundamentals with attractive pricing.
• Prioritise resilience by checking the 74 resilient stocks with low risk scores which concentrates on businesses scoring well on financial strength and volatility.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.