Why Vistra Stock Jumped 28% in November

Shares of Vistra (VST), an unregulated utility company, were among the top performers in November, contributing to its status as the best-performing stock on the S&P 500 index this year. Investors reacted positively to its third-quarter earnings report and the broader market mood following the U.S. presidential election.

According to data from S&P Global Market Intelligence, Vistra's stock surged by 28% during the month. Despite starting off November with a decline, the stock managed to rebound strongly, as shown in the chart below.

Vistra's Continued Upsurge

The enthusiasm surrounding Vistra has grown throughout the year. Many investors believe it stands to benefit from the increasing demands of the AI boom, particularly as new data centers emerge, which will require vast amounts of energy. As an unregulated utility, Vistra is well-positioned to take advantage of this rising demand.

In the beginning of November, Vistra's stock faced a temporary setback. It dropped after a regulatory body rejected a deal involving Amazon and Talen Energy concerning a data center in Pennsylvania, leading to a sell-off across the sector, including Vistra. Nonetheless, investment firm Morgan Stanley labeled this decline as an "excellent buying opportunity."

Following the election, Vistra's stock rebounded by 3.4%, with another 7% jump the next day after it reported better-than-expected earnings for the third quarter. The company reported revenues of $6.29 billion, marking a remarkable 54% increase from the same period last year and easily surpassing the expected consensus of $5.01 billion.

However, it’s important to note that the bottom line is a more accurate reflection of its performance. Vistra's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell from $1.61 billion to $1.44 billion, primarily due to reduced pricing during the summer in Texas and increased supply costs. Vistra also provided guidance suggesting steady growth in EBITDA from $5 billion in 2024 to over $6 billion by 2026.

Image source: Getty Images.

The Future Outlook for Vistra

It appears that Vistra will continue to align with the broader trends in the AI industry for the foreseeable future. Much of its stock value is tied to expectations surrounding AI, including potential advantages from nuclear production tax credits, as there is mounting interest in nuclear power to supply energy for data centers.

Even without significant advancements in nuclear energy, Vistra is likely to benefit from the increasing energy demands stemming from the expansion of AI technologies. However, the surge in Vistra's stock this year can largely be attributed to the prevailing narrative surrounding AI.

Note: John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. The Motley Fool has positions in and recommends Amazon.

Vistra, Stock, Earnings