Is Duke Energy a Good Investment?

PHOTO CREDIT: Duke Energy

OVERVIEW

Duke Energy Corporation is a company based in the United States. The company operates a regulated energy utility company in some states across the nation. The company produces, stores, distributes, and sells electricity to contracted counties and cities. The company offers these services to over 7.8 million customers. The company was founded in 1904.

Why You Should?

1. Duke Energy is a great reopening play in an investor’s portfolio. The pandemic shut down restaurants, sporting venues, as well as parts of the commercial and industrial economy. This led to a drop in demand for energy. However, once this pandemic is over, the company will continue to see growth.
2. Duke Energy is a safe investment option in an investor’s portfolio due to the essential nature of the products and services the company offers. In other words, despite the economic times, the company will continue to use energy products like electricity and natural gas. This will benefit the company and its investors as the stock price will remain stable through volatile times.
3. The company has been investing heavily and innovating to position itself for the future of the energy industry. For example, the company has ramped up investments in solar and wind farms as well as energy storage solutions. This has helped the company move away from non-renewable energy forms like coal. This benefited the company and its investors.
4. Electricity (and the clean generation of this power) is rising in popularity. The company will continue to see rising demands for its products and services. Furthermore, the company will earn more contracts in order to build clean energy infrastructure from the Biden administration and other local governments. This will benefit the company and its investors.

Why You Should Not?

1. The company faces tough competition in the energy utility industry. Though the company usually signs long-term contracts with counties and cities, the company can lose these contracts to other utility providers. Some of these competitors include Dominion, Consolidated Eddison, and many others.
2. The company has been negatively impacted by the pandemic as many of its largest customers (restaurants, sporting events, commercial spaces, and the industrial economy) slowed down or had to shut down. This caused the company to see a drop in both revenues and profits in the financial year of 2020. This will only impact the company in the short to mid-term in my opinion.
3. The energy utility industry is heavily regulated by local, state, and federal government entities. This makes the company a safe investment option but also limits growth for the company as they will not be able to increase prices and lower costs for consumers quickly (they will need to be approved by government entities). This might minimize returns for investors.

MY OPINION

I think that Duke Energy is a great long-term investment due to its position as a safe investment option, its position as a good reopening play, its future innovations, as well as electricity, becoming the future of the energy industry. However, tough competition, negative impacts from the pandemic, as well as tough regulation might hurt the company and its investors in the future.