By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
The panel is divided on Xcel Energy (XEL) with valid arguments for both bullish and bearish stances. Bulls point to data center exposure, infrastructure recovery, and Construction Work in Progress (CWIP) trackers, while bears highlight revenue misses, financing costs, and regulatory risks.
Risk: Regulatory risks, including slow approvals or caps on CWIP returns, could stall rate-base growth and reduce EPS uplift, putting Evercore's $96 target at risk.
Opportunity: XEL's data center exposure and potential utilization of CWIP trackers could drive 5-7% annual load growth and defend the 9% long-term EPS growth target.
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Xcel Energy Inc. (NASDAQ:XEL) is included among the 12 Best Electric Utility Stocks to Buy for the Data Center Surge.
Xcel Energy Inc. (NASDAQ:XEL) is a major US electricity and natural gas company, with operations in 8 Western and Midwestern states.
On May 4, Evercore ISI raised its price target on Xcel Energy Inc. (NASDAQ:XEL) from $93 to $96, while maintaining an ‘Outperform’ rating on the shares. The target boost, which reflects an upside of over 19% from the current price levels, comes after the company reported its Q1 2026 results on April 30.
Xcel Energy Inc. (NASDAQ:XEL)’s adjusted earnings of $0.91 per share in the first quarter were in line with expectations, as the higher recovery of electric infrastructure investments and stronger sales helped offset warm weather and higher financing costs. However, the company’s revenue of $4 billion fell short of estimates by $90 million, despite a YoY growth of almost 3%.
Xcel Energy Inc. (NASDAQ:XEL) reaffirmed its EPS guidance range of $4.04 to $4.16 per share for full-year 2026. Moreover, the company remains confident to deliver 6% to 8+% long-term earnings growth and expects to deliver 9% EPS growth on average through 2030.
While we acknowledge the potential of XEL as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
READ NEXT: 10 Best Electrical Infrastructure Stocks to Buy According to Hedge Funds and 10 Best Fortune 500 Stocks to Buy According to Analysts
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Four leading AI models discuss this article
"Xcel Energy's valuation assumes aggressive infrastructure-driven growth that is highly vulnerable to regulatory pushback and persistent high interest rates."
The Evercore price target hike to $96 highlights the 'data center surge' narrative, but investors should be wary of the $90 million revenue miss. While Xcel Energy (XEL) is banking on infrastructure recovery to drive 6-8% EPS growth, the utility sector faces a massive capital expenditure trap. Financing costs remain elevated, and the reliance on regulatory rate hikes to offset warm-weather demand volatility is a fragile strategy. With a forward P/E around 17x, the stock is priced for perfection. If the promised AI-driven load growth fails to materialize or regulatory commissions push back on recovery timelines, the current premium will evaporate quickly.
The regulatory model provides a defensive moat that shields XEL from the cyclical volatility of pure-play AI stocks, making the 9% long-term EPS growth target more reliable than the article suggests.
"XEL's reaffirmed 9% EPS growth through 2030 positions it as a leveraged play on data center load growth at a discounted 19.5x forward multiple."
Evercore's PT hike to $96 (19% upside from ~$80) signals conviction in XEL's data center exposure across CO, MN, and other states, where hyperscaler demand could drive 5-7% annual load growth per EIA forecasts. Q1 EPS beat weather/financing headwinds via infrastructure recovery, reaffirming $4.04-4.16 FY26 guidance (19.5x forward P/E mid-point) and 9% EPS CAGR to 2030—above peers' 5-6%. Regulated ROE ~10% supports capex ramp without dilution risk. Article omits XEL's $34B 5-year plan, 80% transmission/distribution for electrification tailwinds.
Revenue miss and escalating financing costs (up 20% YoY implied) expose XEL to Fed rate persistence, potentially eroding 50bps EPS if 10Y yields hold 4.5%; data center PPAs require regulatory nods that MN and CO commissions have delayed before.
"An analyst price target 19% above current price paired with unchanged company guidance is a red flag; either the analyst is overreaching on speculative AI tailwinds, or XEL management is sandbagging—neither is a strong bull case."
Evercore's $96 target on XEL is puzzling given the mixed fundamentals. Q1 EPS matched expectations, but revenue missed by $90M—a 2.2% shortfall that's material for a utility. The analyst cites 'data center surge' tailwinds, but XEL's guidance (6-8% LT growth, 9% through 2030) doesn't scream AI-driven upside; it's pedestrian for a utility betting on infrastructure. At current price (~$81), a $96 target implies 18.5% upside, yet the company reaffirmed flat guidance. The disconnect suggests either Evercore sees margin expansion the company won't acknowledge, or the target reflects sector momentum rather than XEL-specific catalysts. Warm weather headwinds and rising financing costs are real drags.
If data center load growth in XEL's footprint accelerates faster than modeled, and regulatory recovery mechanisms lock in margin expansion, the 9% through-2030 EPS growth could prove conservative—potentially justifying a re-rating. The $96 target may be front-running that scenario.
"Upside hinges on regulatory rate-base growth and favorable rate-case outcomes, not solely on near-term earnings."
Xcel's valuation looks modestly constructive on rising infrastructure spend, but the article's bullish takeaway hinges on a single price target rather than a full risk check. Positives: Q1 adjusted EPS of $0.91 was in line, yet weather-driven demand and ongoing electric-grid investments supported earnings; revenue missed by about $90 million, hinting at top-line sensitivity. The reaffirmed full-year guide and 9% long-run EPS growth through 2030 are encouraging, but the upside to $96 assumes multiple expansion in a higher-rate world. Risks include higher financing costs, capex intensity, and regulatory outcomes that could cap rate-base growth or blunt ROEs. Missing context: balance sheet leverage, rate-base growth trajectory, and exact rate-case assumptions.
Counterpoint: the revenue miss combined with higher financing costs and a potentially tight rate-case regime could flatten valuation upside, meaning the $96 target may overstate re-rate potential absent a clear rate-base expansion path.
"Xcel's use of CWIP trackers mitigates capital expenditure risks and provides a structural earnings hedge that analysts are overlooking."
Claude, you’re missing the specific regulatory mechanism here. Xcel isn't just betting on load growth; they utilize 'Construction Work in Progress' (CWIP) trackers in key jurisdictions like Colorado. This allows them to earn a return on capital before projects are even operational, effectively bypassing the typical lag that kills utility cash flows. This isn't 'pedestrian'—it’s a structural hedge against financing costs that makes the 9% growth target far more defensible than the revenue miss suggests.
"XEL's CO/MN footprint lags top data center hubs, capping load growth below peers due to long interconnection delays."
Grok emphasizes CO/MN data center exposure for 5-7% load growth, but those states trail VA/TX/GA, which claim 70%+ of hyperscaler capacity per EIA Q1 2024. MN interconnection queues exceed 3 years (MISO data), delaying PPAs and capex recovery. This, atop the $90M rev miss, suggests Evercore's 'surge' overstates XEL's slice of AI demand—watch for guide cuts if queues persist.
"CWIP trackers could justify the 9% growth target independent of near-term load realization, but regulatory approval risk is underexplored."
Grok's queue-delay risk is real, but Gemini's CWIP tracker point exposes a critical gap: if CO/MN commissions allow CWIP recovery, XEL earns returns on capex *before* data center load materializes. That flips the revenue-miss narrative—top-line pressure becomes less relevant if rate-base growth is decoupled from realized demand. The question: do CO/MN regulators actually approve aggressive CWIP trackers for speculative AI infrastructure, or does Gemini assume regulatory goodwill that recent precedent doesn't support?
"CWIP-based rate-base growth is regulatory-dependent and not a guaranteed hedge; without favorable approvals or with stricter prudence reviews, the expected ROE uplift and 9% LT EPS growth may not materialize even if data-center demand proves up."
Gemini argues CWIP trackers fundamentally defend the 9% LT EPS growth; but the real risk is regulatory risk: CO/MN approvals can be slow or cap CWIP returns; if the regulator tightens trackers or requires additional prudence reviews, rate-base growth stalls, reducing the EPS uplift even if data-center demand materializes; in that case Evercore's $96 target would be at risk despite Q1 prints.
The panel is divided on Xcel Energy (XEL) with valid arguments for both bullish and bearish stances. Bulls point to data center exposure, infrastructure recovery, and Construction Work in Progress (CWIP) trackers, while bears highlight revenue misses, financing costs, and regulatory risks.
XEL's data center exposure and potential utilization of CWIP trackers could drive 5-7% annual load growth and defend the 9% long-term EPS growth target.
Regulatory risks, including slow approvals or caps on CWIP returns, could stall rate-base growth and reduce EPS uplift, putting Evercore's $96 target at risk.