NextEra: The Green Energy Leader Can Benefit From Data Center

NextEra Energy (NEE) $84 has a huge scale of operations. It is the largest green energy producer in the world and the largest player in the U.S. market with more than 20% market share. Long-term revenue of at least 10% a year and dividend growth seem assured, but I would wait for a better entry price.

The U.S. is forecast to experience a significant growth in electricity demand in the coming years, fuelled by the growth in data centers and AI, the proliferation of electric vehicles, the increased use of energy in the home, and the increasing number of extreme weather events, especially prolonged heat spells.

Estimates vary, but NEE is expecting a 38% growth in power demand over the next 20 years (Statistica says 27%); that growth is 4 times higher than the growth seen in the previous 20 years. Clearly, data center demand will outstrip decades of growth, given the hyper scaler Capex.

NEE has a solid balance sheet with an A- credit rating and its unprecedented scale allows it to access huge amounts of capital. Its operating margins are more than 30% – This is a huge competitive advantage especially if data center power generation pans out. The long-term nature of their business and proven ability to generate cash over a long period de-risks the high level of debt.

The stock is up 55% in the past year but is definitely interesting to buy on a pullback.