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On Monday, Piper Sandler analyst Derek Podhaizer increased the price target for Solaris Energy Infrastructure (NYSE:SEI) to $50.00, up from the previous target of $37.00, while maintaining an Overweight rating on the company’s shares. The adjustment follows a significant rise in Solaris Energy’s stock on Friday, which saw a 23% increase in value. According to InvestingPro data, the stock has delivered an impressive 383% return over the past year, with a notable 27.7% gain just last week. The company, now valued at $2.42 billion, appears overvalued based on InvestingPro’s Fair Value analysis.
The price target revision was influenced by Solaris Energy’s recent expansion and contract developments. The company doubled its fleet size to 1.4 gigawatts (GW) by ordering an additional 700 megawatts (MW). Additionally, Solaris Energy unveiled a 500MW six-year data center contract through a joint venture, in which it holds a 50.1% stake. This contract is expected to generate attractive returns, with an estimated $300,000 per EBITDA per year, which translates to $75 million on 250MW and suggests a three-year payback on a $0.9 million per MW investment. InvestingPro data shows the company maintains strong financial health with a current ratio of 3.83 and operates with a moderate debt-to-equity ratio of 0.92.
Podhaizer emphasized the significance of the company’s multi-year contracts and a shift toward more permanent power solutions. Solaris Energy’s new modular equipment orders, which are not mobile, indicate a strategic move to establish a more fixed presence in the power sector. Management has expressed confidence that the company’s 450MW of available capacity will be contracted out within a period of six to nine months.
The new price target of $50 is based on an updated valuation methodology. For the sum-of-the-parts (SOTP) analysis, an $325,000 per EBITDA per year valuation was applied, along with an 87.5% effective utilization rate on net Solaris Energy capacity of 1.15GW. This takes into account the 1.4GW total capacity minus the 250MW related to the joint venture. The figures were then multiplied by an 11.5x multiple for the company’s Power Solutions segment. InvestingPro reveals the company currently trades at an EV/EBITDA multiple of 21.44x, with last twelve months EBITDA of $88.3 million. For deeper insights into SEI’s valuation and 15+ additional ProTips, access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, Solaris Energy Infrastructure has announced a public stock offering priced at $24.75 per share, aiming to raise approximately $156 million. The funds will be used to expand its power generation equipment, including the purchase of new natural gas turbines. Additionally, Solaris Energy reported a change in its executive leadership, with CEO William A. Zartler assuming the role of principal operating officer following the retirement of Kelly Price. Stifel has raised its price target for Solaris Energy shares to $48, maintaining a Buy rating, citing strong fourth-quarter performance and a significant new contract for power supply. The company is also finalizing a joint venture with a major data center client, which has contributed to the positive outlook from Stifel. Piper Sandler initiated coverage on Solaris Energy with an Overweight rating and a $37 price target, highlighting the company’s strategic expansion into the distributed power generation market. This expansion is bolstered by Solaris Energy’s acquisition of Mobile Energy Rentals and its focus on meeting growing power demands from AI data centers. These developments reflect Solaris Energy’s ongoing transformation and strategic positioning in the energy sector.
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