NextEra Bulls Getting A Treat In The Form Of A Sweet Entry Point

NextEra Energy Inc NEE shares have come back down to re-test the lows set in early March at $97-$98 after peaking at around $112 in late January.

The movement is partially tied to the increase in interest rates in the recent weeks. The question is whether rates will continue higher (putting pressure on all "dividend stocks") or whether they will turn back to the downside (giving higher yielding "safety" stocks a renewed boost). This all assumes that the fundamentals of the company are status quo.

Let's take a look at the fundamental and technical pictures for NextEra to get an idea of what the future will hold for shareholders.

What The Bulls See

• Some cheap valuation metrics: An enterprise value of $73.07 billion that trumps the market capitalization of $44.02 billion, a price-to-sales of 2.53 and a price-to-book ratio of 2.18.
• Fifteen percent net profit margins that spin off over $5.5 billion in operating free cash flow annually.
• Decent management effectiveness ratios: A return-on-assets of 4.12 percent and a return-on-equity of 13.92 percent.
• An annual dividend yield of 3.1 percent.

What The Bears See

• Negative levered free cash flow of $2 billion for this year.
• The typical high debt structure for a utility company (not necessarily a bad thing): Cash of $469 million versus total debt of over $29 billion, a debt-to-equity ratio of 143.99 percent and a current ratio of 0.67.
• A PE ratio of around 16 versus estimated revenue and EPS growth estimates for the next year of 5.9 percent and 7.6 percent, respectively.

The Technical Take

Technicians note that NextEra stock may end up going lower in the intermediate-term, but not before some sort of bounce occurs. NextEra shares are sitting right above long-term support (made apparent on the weekly chart) at $98.07. From this level, the technicians note there is a possibility of a bounce up to the $102.77 to $103.88 range before they say the stock will move to levels below $98.07.

If they are wrong, $107.47 is the next resistance level above $103.88. A weekly close below $98.07 in the short-term will represent a break of the long-term uptrend line.

Overall…

NextEra could be a favorite of the technical trading crowd at current levels as it sits above the dual support created by the long-term uptrend line and a horizontal line created by the March lows. When support is so close by, it offers what they deem a high reward-to-risk ratio. However, when the stock runs up to the projected technical resistance range, the opposite effect may take place (meaning technical sellers will be entering the fray).