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On Tuesday, Jefferies analyst Julian Dumoulin-Smith adjusted the price target for Ormat Technologies (NYSE:ORA) stock, reducing it slightly from $86.00 to $84.00. Currently trading at $68.27 with a market capitalization of $4.13 billion, the stock trades at a P/E ratio of 33.4x. Despite this change, the firm maintains a positive outlook on the company, continuing with a Buy rating. The adjustment reflects a strategic focus on geothermal energy, which is seen as having a more favorable return profile compared to energy storage. According to InvestingPro analysis, the stock appears slightly overvalued at current levels, though analyst targets range from $75 to $100.
The analyst's commentary highlighted Ormat Technologies' potential to concentrate on geothermal expansion, especially if the energy storage sector experiences a slowdown. With revenue growth of 6.06% and EBITDA of $440.64 million in the last twelve months, the company shows solid operational performance. Dumoulin-Smith noted that while expansion in geothermal is more complex due to extensive exploration and permitting processes, Ormat Technologies is already increasing its exploration activities. This proactive approach is expected to position the company for stronger growth in the coming years. InvestingPro data reveals the company has maintained dividend payments for 21 consecutive years, demonstrating financial stability.
The attractiveness of geothermal energy is underscored by its higher unlevered returns relative to energy storage, and a lower risk profile under the Investment Tax Credit ( ITC (NSE:ITC)) safe harbor provisions, which are more challenging for storage projects to meet. Additionally, the current pricing for geothermal energy exceeds $100 per megawatt-hour (MWh), a figure that is anticipated to rise as the demand for renewable baseload power surpasses supply.
Jefferies' revised outlook extends the firm's forecast for Ormat Technologies up to the year 2030, incorporating a conservative estimate of accelerated geothermal growth post-2028. This growth projection includes an increase of over 100 megawatts per year, which signifies a considerable expansion for the company's geothermal capacity.
In other recent news, Ormat Technologies Inc . reported its financial results for the fourth quarter of 2024, revealing an earnings per share (EPS) of $0.72, which exceeded analyst expectations of $0.51. The company generated revenue of $230.7 million, which was slightly below the forecast of $236.45 million. Despite the revenue shortfall, the strong EPS performance suggests effective cost management and operational efficiencies. In another development, Ormat Technologies announced that Mike Nikkel, a director on the company's board, will not seek reelection at the 2025 annual meeting. This decision follows the termination of a governance agreement with ORIX Corporation, which had previously allowed ORIX to nominate a director to the board. The board had requested Nikkel to continue serving due to his expertise in the renewable energy market, but his departure aligns with ORIX's guidelines post the agreement's termination. These recent developments highlight the company's ongoing strategic changes and financial performance.
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