Jefferies raises Ormat stock rating, lifts target to $78

On Thursday, Jefferies analyst Julian Dumoulin-Smith upgraded Ormat Technologies (NYSE:ORA) stock from Hold to Buy and increased the price target to $78, up from the previous $73. The new price target suggests an 18% potential upside from the stock’s recent closing price. According to InvestingPro data, the stock has fallen nearly 9% over the past six months, with current market capitalization standing at approximately $4 billion.

Dumoulin-Smith highlighted the strategic positioning of Ormat’s approximately 1.5GW portfolio in the current energy market. The analyst pointed out that as renewable energy sectors face policy challenges and potentially slower growth in 2025, power companies like Ormat could benefit from the rising demand for decarbonized baseload power. This demand could lead to favorable recontracting opportunities for Ormat, which has already secured high prices on renewed Power Purchase Agreements (PPAs).

The recommendation to upgrade comes amid observations that Ormat’s trading multiples are not aligned with its value when compared to legacy power peers. The analyst believes that the market will correct this undervaluation, leading to a price more in line with Ormat’s power sector counterparts.

The analyst’s commentary suggests that despite Ormat Technologies achieving high clearing prices on its PPAs, the current trading multiples of the company’s stock do not reflect its actual valuation when measured against traditional power industry standards. InvestingPro analysis reveals the company trades at a P/E ratio of 33.5x and has maintained dividend payments for 20 consecutive years, though current metrics suggest the stock may be trading above its Fair Value.

Ormat Technologies specializes in geothermal and recovered energy generation. The company’s focus on sustainable and reliable energy aligns with the growing global trend towards decarbonization and the shift away from fossil fuels. With this upgrade, Jefferies signals confidence in Ormat’s potential for growth and market correction. Recent InvestingPro data shows impressive revenue growth of 12.2%, with the company’s next earnings report scheduled for February 26. Subscribers can access over 30 additional financial metrics and insights through InvestingPro’s comprehensive research report.

In other recent news, Orange has reported a modest increase in its full-year 2024 revenues, achieving €40.3 billion, which marks a 1.2% growth compared to the previous year. The company’s EBITDA also improved, rising by 2.7% for the year, with a notable 3.2% increase in the fourth quarter. Strategic partnerships, particularly with Mistral AI, contributed significantly to Orange’s performance, adding €200 million in value for 2024. Meanwhile, Ormat Technologies Inc . has announced securing two 15-year tolling agreements for energy storage facilities in Israel, marking its entry into the Israeli utility-scale energy storage market. These projects, developed with Allied Infrastructure LTD, will have a combined capacity of 300MW/1200MWh and are expected to be operational by 2028. On the analyst front, Orange’s future growth prospects have been positively influenced by its AI initiatives, as noted by the company’s strategic focus on digital transformation. These developments reflect ongoing efforts by both companies to expand their operations and enhance their market positions.

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