Southern Company (SO) Stock Forecast & Price Target

Southern's strong performance in commercial load growth, recording +2.8% in 2Q24 and +3.3% year-to-date, is largely supported by robust economic conditions and a remarkable +17% year-over-year growth in data center usage. The company's ambitious capital plan for 2025-2029 is anticipated to underpin its long-term growth rate of 5-7%, with potential for even more accelerated growth as load demand and investments continue to rise. Additionally, the substantial increase in the pipeline for large load data centers, which has grown by 40% since last fall, signals a healthy commitment to expanding capacity and fulfilling increasing energy demands.

Southern Company's retail sales displayed minimal growth, with weather-normalized metrics indicating a year-over-year decline primarily due to Hurricane Helene, contributing to a negative sentiment around the utility's ability to sustain robust sales momentum. The company's regulatory relationships, while historically strong, face potential challenges that could adversely affect earnings if macroeconomic conditions worsen. Furthermore, the current limited upside from their contracted gas generation portfolio, combined with anticipated increased capital recovery costs related to their 2025 rate case in Georgia, suggests financial strain may hinder Southern's performance in the near to medium term.