Upgrade of U.S. Power Grid Could Drive Quanta Services Stock, Says UBS

According to UBS, the effort to upgrade the U.S. power grid is heating up rapidly, and this trend could be a driver for Quanta Services stock. UBS reiterated a buy rating on the infrastructure company, with an updated $228 price target, suggesting about 18% upside for the stock. Quanta Services plans and implements infrastructure projects for electric power, pipelines, and telecommunications companies. The company stands to benefit from the Biden administration’s Inflation Reduction Act, which provides funds for investments in renewable energy and updating the power grid. Shares of Quanta Services have gained approximately 41% since the beginning of the year.

Analyst Steven Fisher stated that the electric grid investment is entering a new phase of growth, with renewables activity accelerating and large transmission projects gaining momentum. Fisher attributed this growth to the IRA, which provides investments into renewable energy and grid updates. He believes that Quanta Services will experience faster top-line growth, higher margins, and increasing scope on projects. The company is taking steps to mitigate risk by doing more engineering work, increasing control over procurement, and being selective with customers and projects. Fisher updated the list of planned projects to include Oregon Public Utility Commission’s Boardman to Hemmingway, Colorado’s Power Pathway, and Ready Wyoming.

Most of the projects on Quanta’s horizon involve updating power grids. Fisher expects this new wave of large projects to drive revenue and margins higher for Quanta Services. On Monday, the stock was trading up more than 3% and has gained about 40% since the start of the year. – AsumeTech’s Michael Bloom contributed reporting.