Jefferies Hikes Talen Energy Target on Strong Outlook; CMS Energy Boosts 2026 Forecast Amid AI Boom

The energy sector is seeing renewed bullishness as soaring electricity prices and massive demand from data centers reshape company outlooks. This trend was highlighted as Jefferies raised its price target for Talen Energy, while CMS Energy simultaneously boosted its 2026 earnings forecast, citing the power-hungry artificial intelligence industry.

Jefferies Raises Talen Energy Target

Jefferies increased its price target on Talen Energy (NASDAQ:TLN) to $481.00 from a previous $448.00, while reaffirming its “Buy” rating on the stock. This new target represents a potential upside of approximately 21% from its recent trading price of $398.55.

The firm cited high electricity market prices and a re-evaluation of the market extending through 2028 as key factors for the upgrade. Jefferies noted that cash flow generation for Talen is expected to accelerate significantly from 2026 onward.

Despite Talen’s shares having already nearly doubled year-to-date—posting a 97.82% return—and gaining an impressive 128.75% over the past 12 months, Jefferies maintains that the company still offers an attractive risk/reward profile.

Talen’s Data Center Strategy and Financing

Analysts at Jefferies expressed confidence in Talen’s ability to secure major data center contracts in Pennsylvania. This optimism persists despite growing market skepticism about the viability of new gas-powered data center agreements. The firm pointed out that no potential upside from these gas-related projects is currently priced into Talen’s stock, though the timeline remains uncertain due to delays in the Department of Justice approval process.

In other recent developments, Talen Energy Corporation announced that its subsidiary, Talen Energy Supply, LLC, intends to offer senior notes due in 2034 and 2036. The proceeds from this offering, combined with a new $1.2 billion guaranteed term loan, are earmarked to finance the acquisitions of the Freedom Energy Center in Pennsylvania and the Guernsey Power Station in Ohio.

Furthermore, Talen has secured commitments to increase its existing revolving credit facility from $200 million to $900 million and to expand its letter of credit facility from $200 million to $1.1 billion. The maturity for the letter of credit facility has been extended to December 2027.

Other analysts are also taking note. Scotiabank recently initiated coverage on Talen with a “Sector Perform” rating, while Melius Research initiated coverage with a “Buy” rating, emphasizing the company’s data center strategy and its strategic transformation under new leadership.

CMS Energy Boosts 2026 Earnings on AI Demand

The optimism surrounding Talen’s data-driven growth reflects a powerful trend impacting the entire U.S. utility market. U.S. electricity and gas company CMS Energy (NYSE:CMS) projected higher earnings for 2026 on Thursday, attributing the strong forecast directly to high-energy demand from AI data centers and hyperscalers.

This surge in demand is being seen across the United States as the rapid adoption of artificial intelligence requires more power-intensive data centers. This is compounded by individuals and businesses increasingly using electricity for heating and transportation. The U.S. Energy Information Administration (EIA) had already forecast in February that electricity demand would reach record levels in 2025 and 2026.

The Jackson, Michigan-based company now forecasts its 2026 earnings to be in the range of $3.80 to $3.87 per share. This is up from its 2025 guidance of $3.56 to $3.60 per share, the low end of which was also raised by 2 cents. This forecast aligns with analyst expectations, which averaged $3.59 per share for 2025 and $3.85 per share for 2026.

CMS Quarterly Performance Beats Estimates

CMS Energy’s third-quarter revenue increased by nearly 16% year-over-year, reaching $2.02 billion and surpassing the average analyst estimate of $1.85 billion, according to LSEG data.

The company earned 93 cents per share on an adjusted basis for the quarter, beating analyst estimates of 85 cents. However, total quarterly operating expenses also grew, rising to $1.54 billion from $1.38 billion one year earlier.

Reflecting the positive outlook, shares of CMS Energy have climbed nearly 30% year-to-date, significantly outpacing the 13.6% gain of the broader S&P utilities index (.SPLRCU).