Xcel Energy (XEL): AI-Powered Bullish Options Outlook

Xcel Energy is a regulated electric and natural gas delivery company. It provides energy-related products and services to approximately 3.9 million electric customers and 2.2 million natural gas customers through its four utility subsidiaries: 'NSP-Minnesota', 'NSP-Wisconsin', 'PSCo', and 'SPS'. The company's regulated utility operations also include transmission-only subsidiaries 'WYCO' and 'WGI'. Its target markets include residential, commercial, and industrial customers across eight states. Xcel Energy aims to be a trusted energy provider by enhancing customer experience, providing a rewarding employee experience, and delivering excellent operational, financial, and clean energy performance. A key part of their strategy is leading the clean energy transition, aiming for zero-carbon electricity and net-zero GHG from natural gas by 2050, while also focusing on wildfire resiliency and mitigation.

The provided analyst rating from Citigroup is a moderately bullish signal for XEL. The 'Buy' rating, coupled with a significant price target increase from $80 to $92, suggests that Citigroup believes the stock is undervalued and has considerable upside potential. This revised price target provides a concrete benchmark that traders may use to evaluate XEL's performance. Given the time horizon of 1-2 weeks, the impact of this news is likely to be positive, as it could attract increased investor attention and buying pressure. While a single analyst rating is not definitive, Citigroup's reputation adds weight to the assessment. Without conflicting information, the path of least resistance for XEL in the short term leans upward. However, traders should remain mindful of broader market conditions and sector-specific trends that could moderate or negate this positive influence. A more aggressive options strategy may be warranted, but position sizing should reflect the inherent uncertainty of short-term market movements.

XEL's technical outlook is moderately bullish. The price has experienced a significant upward trend over the past 90 days, climbing from approximately $67.57 in late June to $81.56 as of November 4, 2025. The price is currently trading above its 21-day EMA ($80.22) and its 50-day SMA ($77.11), signaling short-term and medium-term bullish momentum. The 200-day SMA ($71.10) is also well below the current price, further supporting this trend. Momentum indicators such as the MACD are positive (MACD at 0.91 and MACDs at 1.15) with a MACDh trending towards zero, suggesting a possible consolidation after a strong push. The RSI at 60.79 indicates moderate buying pressure but is not yet in overbought territory. Stochastic oscillator (STOCHk) at 63.54 is below STOCHd at 48.10. The ADX at 30.30 indicates a strong trend is in place. Overall, the technical indicators suggest continued upward momentum, although the stock may experience short-term pullbacks or consolidation periods given the recent strong advance and the MACD histogram nearing zero.

Xcel Energy's MD&A paints a cautiously optimistic, yet complex, picture. For the three months ended Sept. 30, 2025, GAAP diluted earnings were '$0.88' per share compared to '$1.21' in 2024, while ongoing earnings were '$1.24' compared to '$1.25' per share in 2024. The decrease in GAAP EPS was impacted by the '$287 million' Marshall Wildfire settlement charge. Weather-normalized retail electric sales are projected to increase '~3%' for both 2025 and 2026, indicating stable demand. However, O&M expenses are projected to increase ~5% in 2025 and ~3% in 2026, while interest expense is also projected to increase, impacting profitability. Net cash provided by operating activities decreased '$103 million' for the nine months ended Sept. 30, 2025, compared to the prior year, primarily due to the timing of regulatory recovery. Capital expenditures are expected to be approximately '$60 billion' from 2026-2030, funded by a combination of cash from operations ('$30,180 million'), new debt ('$22,820 million'), and equity issuances ('$7,000 million'). The company reaffirmed its 2025 ongoing earnings guidance of '$3.75 to $3.85' per share and 2026 ongoing earnings guidance of '$4.04 to $4.16' per share, and continues to target long-term EPS growth of '6% to 8+%'.

Xcel Energy's Q2 2025 earnings call projects a moderately bullish outlook, driven by strong performance and increased capital investment plans. The company reported strong earnings of $0.75 per share, with CEO Frenzel stating they 'remain confident in our ability to deliver on our earnings guidance'. Weather-normalized electric sales increased 3.5%, and the company reaffirmed its 2025 guidance range of $3.75 to $3.85 per share. A key highlight was the announcement of a likely $15 billion increase to the company's 5-year capital plan, driven by generation needs in Texas and New Mexico, as well as transmission projects to support reliability and regional growth. CFO Van Abel noted that the company is 'managing a strong balance sheet' and will use a balanced mix of debt and equity to fund growth. While the Marshall trial remains a concern, management conveyed confidence in their position, stating that 'our equipment didn't cause that second condition'. The company also highlighted progress in settling Smokehouse Creek wildfire claims. Overall, the call suggests a positive trajectory for Xcel Energy, supported by robust growth prospects and a commitment to infrastructure investment.

XEL's financial performance presents a mixed picture. Revenue has generally increased, fluctuating between $3.028B in Q2 2024 and $7.081B in Q3 2025. Gross profit margins have been inconsistent, ranging from 0.412 in Q4 2024 to 0.511 in Q3 2024 and then dropping to 0 in Q3 2025. Operating cash flow has been volatile, with Q3 2025 showing $1.765B, while previous quarters show fluctuating positive cash flows. Total debt has increased from $27.514B in Q4 2023 to $34.636B in Q3 2025, indicating increased leverage. While revenue growth is apparent, the inconsistent profitability, operating cash flow, and rising debt levels create uncertainty about the company's financial stability and future performance.

The company presents a moderately bullish investment profile based on its financial data. Revenue has shown positive growth, indicating increasing market demand or successful market penetration. The gross margin is healthy, suggesting efficient cost management in production or service delivery. A strong return on equity (ROE) signals effective utilization of shareholder investments to generate profit. The price-to-earnings (P/E) ratio suggests the stock is trading at a premium, but this could be justified by the company's growth prospects and profitability. A manageable debt-to-equity ratio indicates a reasonable level of financial leverage. The current ratio, being greater than 1, demonstrates the company's ability to cover short-term liabilities with its current assets, further solidifying its financial health. Overall, the combination of revenue growth, healthy profitability metrics, and a solid balance sheet makes the company an attractive investment for the next 12 months, although the elevated P/E ratio warrants careful monitoring.