NextEra Energy: Overvalued As Irrational Exuberance Returns (Rating Downgrade)


  • Rising interest rates and changing energy fuel prices have slowed down demand for renewable power in the utilities sector.
  • NextEra Energy, Inc., the largest U.S. utility stock, has seen its share price rebound after experiencing losses earlier this year.
  • NextEra Energy’s focus on renewable power is not vastly different from its peers, but it is transitioning, with a significant portion of its capital expenditure going towards solar and wind.
  • NextEra Energy’s valuation premium to its peers is difficult to justify, even if we account for its higher EPS growth outlook.
  • Overall, utility stocks appear overvalued compared to inflation-indexed bonds, with NextEra’s premium being particularly excessive.

A sunset drone view of a wind farm on a hilltop in Scotland

Justin Paget

The utilities and renewable power industries have experienced increased volatility recently, as rising interest rates and changing energy fuel prices pressure the electricity market. For the most part, we’ve seen a slowdown in demand for renewable power stemming from higher

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