NextEra Energy (NYSE:) is a leading clean energy utility company, providing electricity to more than 12 million people across Florida. Currently, below $74, the stock is trading near the middle of the range formed by its all-time high of $93.73 reached in late-2021 and the October 2023 low at just above $47 a share. The Elliott Wave structure of the recovery from that decline, however, indicates that the bulls could soon test the upper boundary of that range.
A clear Elliott Wave cycle to the upside has emerged from the bottom at $47.14. We’ve labeled its impulsive phase 1-2-3-4-5 in wave A up to $86.10, while its corrective phase is best seen as a w-x-y double zigzag down to $61.72. The bullish reversal from the 61.8% Fibonacci support level must be part of wave C, whose initial targets lie above the top of wave A.
In other words, the bulls should be able to exceed $86.10 in the not-so-distant future. How much further can the price go from there? To answer that question, we need to zoom out to the weekly chart of NextEra Energy.
It shows that the late-2021 record high was the culmination of a five-wave impulse pattern, which had been in progress since before the year 2000. It is marked (1)-(2)-(3)-(4)-(5), where wave (2) corresponds to the Great Recession of 2008, while wave (4) stands for the COVID-19 panic of 2020. So the 50% decline from $94 to $47 is just the natural three-wave retracement, which follows every impulse.
We just don’t think that the recent recovery to $86 represents the resumption of the preceding uptrend. Instead, we believe that a larger expanding flat correction is under construction, whose wave C of (B) up has just begun. It could lift the stock towards the $100 mark, before wave (C) drags it back down to the mid-$40s.
The reason why we’re skeptical of the durability of the recovery has more to do with the fundamentals and valuation of NextEra Energy. Even though 2024 was the company’s best year ever in terms of free cash flow generation with $4.75B, this was more of an outlier. But even if we base our valuation on $5B in FCF, the company’s market cap of over $150B makes the stock quite expensive at more than 30 times that.
Not to mention that NextEra is not exactly a fast grower in terms of sales, while its debt load has nearly doubled over the last five years. And its CapEx needs are not going down anytime soon. All this gives us little optimism that the stock would move far beyond $100 a share. Elliott Wave points to a big move in the opposite direction.