Xcel Energy (XEL): Assessing Valuation as New Gas Projects Expand Power Portfolio in Texas and New Mexico

Xcel Energy (XEL) is making a strategic push to expand its power generation in Texas and New Mexico by converting an older coal plant to natural gas and building new gas-fired facilities. The company recently acquired turbines from Siemens Energy to support these projects.

See our latest analysis for Xcel Energy.

Xcel Energy's steady expansion into the Southwest comes on the back of several headline-worthy events, including a major bond offering, settlement agreements tied to past litigation, and the company reaffirming its 2025 earnings guidance. While these developments captured market attention, momentum for the stock itself has been low key. Xcel Energy’s most recent share price is $80.26, and its one-year total shareholder return is essentially unchanged. Investors appear watchful, weighing growth potential from new projects and longer-term prospects as Xcel navigates a transforming energy landscape.

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With shares holding steady despite robust expansion plans and solid operating results, investors are left to wonder whether Xcel Energy is undervalued at current levels or if the market has already accounted for much of the future growth potential.

Most Popular Narrative: Fairly Valued

At $80.26 per share, Xcel Energy’s price aligns closely with the most widely followed narrative’s fair value of $78.08. This sets up a story driven by high expectations for investment and expansion, even as the price move remains muted.

“Bullish analysts point to Xcel's higher-than-expected investment opportunities, with potential rate base growth approaching 14% and earnings growth above 9%. This makes the current valuation attractive.

Xcel trades at a group average multiple, despite demonstrating peer-leading rate base and earnings growth. This represents a compelling entry point.”

Read the complete narrative.

Want to uncover the strategy powering these valuations? The secret ingredient is a bold earnings roadmap and a growth story that outpaces utility peers. Curious which future milestones are driving analysts’ confidence? Dive in for the surprising details behind this consensus fair value.

Result: Fair Value of $78.08 (ABOUT RIGHT)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing wildfire liabilities and any slowdown in electrification demand could quickly undermine the optimistic outlook for Xcel Energy's growth trajectory.

Find out about the key risks to this Xcel Energy narrative.

Another View: Our DCF Model Challenges the Fair Value Story

While analysts conclude Xcel Energy’s price aligns with fair value based on earnings and growth outlook, our DCF model tells a different tale. It estimates a fair value of just $66.42 per share. This suggests that Xcel may be overvalued at current prices. Could the market be overlooking future risks or optimistic projections?

Look into how the SWS DCF model arrives at its fair value.

Build Your Own Xcel Energy Narrative

If you'd rather challenge the consensus or follow your own instincts, you can build a personalized valuation and narrative in just a few minutes. Do it your way

A great starting point for your Xcel Energy research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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