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Talen Energy could be set up for major gains over the next several months, according to Morgan Stanley. The firm initiated coverage on the power producer with an overweight rating and set its price target at $243. That implies more than 37% upside from Tuesday’s close. “The company operates the Susquehanna nuclear plant in PA and a fleet of 11 gas and coal plants, primarily in the mid-Atlantic market,” analyst David Arcaro wrote in a Wednesday note to clients. “The stock fits squarely into our broader thesis on powering AI: Talen’s nuclear plant offers highly valuable speed to market for Amazon by locating its data center at the nuclear site, with a very credible opportunity to expand the contract from current levels this year.” While shares are up more than 8% after Morgan Stanley’s call, the stock has had a rough time in recent weeks. Tuesday’s close was 31% off its 52-week high, and over the past month, shares have fallen more than 19%. TLN 1M mountain TLN, 1-month Talen’s nuclear contract expansion with Amazon could serve as a major catalyst for the stock, according to Arcaro. He said the new agreement could add $20 to $60 per share to its value. “The stock trades at a level that assigns no value for additional data center contracts, on our estimates, so we see an attractive entry point with multiple opportunities to capture further upside,” the analyst continued, noting that new deals with data centers could result in $46 per share of additional value. Additionally, Arcaro pointed to the company’s improving fundamentals, saying that its fleet benefits from higher power prices, as supported by increasing demand for power from data centers against a tight market backdrop in the years ahead. Arcaro’s call has support on Wall Street. All 12 analysts who cover the company rate it a strong buy or buy, and its $261 consensus price target implies more than 48% upside potential from Tuesday’s close.
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