NRG Energy (NRG) was a featured write-up for members on 12/12/2023 with a focus on March $48 calls that since gained around 700%, a huge win for members.

Here is what we wrote on 12/12/23:

NRG Energy (NRG) on 12/11 saw a large buyer of 7000 March $48 calls at $2.85 for nearly $2M in call premium bought as the name nears a big breakout. NRG has been one of the stronger utility names of the year and continues to see confident buyers into strength. Last week also saw a buyer of 1350 June $55 calls at $1.85 while still holding over 10k of the December $40 ITM calls in OI that were bought back in late June for $2.20 and more than tripled now, potentially rolling out by Friday or taking exercise to own shares and collect the dividend. NRG also still has over 1000 Jan $30 ITM calls holding in OI from buys at $8.00. The $11.0B utility company trades at 7.7x earnings, 0.8x sales, strong FCF yield of 20.5% and a dividend yield of 3.4% with revenues expected to rise +1% in FY24 and growth estimated at +3% in FY25. NRG Energy, Inc. is an energy, smart home and services company, which is engaged in producing and selling energy and related products and services in the United States and Canada. It develops sustainable solutions under the brand names NRG, Reliant, Direct Energy, Green Mountain Energy, and Vivint. NRG recently announced leadership changes as the CEO departs and resigned from the Board, this as a result of the agreement made with its large investor Elliott Management who has been adamant about unlocking value in the company through changes to its strategy, cost savings targets and capital allocation framework. Shares have been rallying strongly as it rides its 8 and 21 EMA’s higher since the breakout above 40 back in October. The stock now trying to clear a small bull flag from its recent range as it shows great strength above its monthly value area near 47.50 this past week. Any dips to the 46 level are likely good buy points while the upside can see 50 as a near term target and longer term the monthly chart is breaking out of a 5-year range so could just be starting a bigger picture move to 55-60. Average analyst price target is $49. Citi upped its target to $52 from $46 last month and keeps a Buy rating saying margins and volumes improved and the Vivint integration is going reasonably well. Also citing the accelerated $950M share buyback program should continue to boost the stock. BMO boosted its target to $49 recently citing the CEO change. Seaport Research also raising its target to $51 and keeps a Buy rating saying the CEO departure and board refresh should facilitate an open dialogue with investor Elliott though meaningful cost efficiencies or changes to NRG’s smart home strategy is unlikely. The firm says that instead of lower costs, NRG now needs a peaker in Texas and an expedited rollout of automated residential demand response enabled by Vivint Smart Home’s smart control panels. Short interest is at 6.0%. Hedge fund ownership rose 7.5%. Elliott Management is a large activist investor in the name and added 7.59 million shares last quarter as they now own 10.36M shares and nearly 5% of the company.