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Oppenheimer cites higher geothermal returns in new Ormat Technologies shares outlook

EditorEmilio Ghigini
Published 06/21/2024, 07:10 PM
© Nir Slakman, Ormat Technologies PR
ORA
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On Friday, an analyst from Oppenheimer adjusted the price target for Ormat Technologies (NYSE: NYSE:ORA) shares, a company specializing in geothermal energy, to $85.00, up from the previous target of $83.00. The firm maintained an Outperform rating on the stock. The revision followed Ormat's 2024 Investor Day, where the company outlined its long-term portfolio and financial goals.

Ormat Technologies, during its recent Investor Day, highlighted several key insights that could impact its future performance. The company anticipates that its geothermal projects will yield higher returns, with Power Purchase Agreements (PPAs) potentially exceeding $100 per megawatt-hour (MWh). Additionally, the timeline for project permitting is expected to be cut by approximately 50%, which could streamline operations and accelerate development.

The analyst also noted that Ormat is poised for growth, with a robust pipeline of assets currently under construction. The company plans to finance future expansion through a combination of internal cash flows and incentives provided by the Inflation Reduction Act (IRA), which could lead to a stronger balance sheet and improved returns on invested capital (ROIC).

Furthermore, Ormat's energy storage segment was identified as an area with significant potential. The company aims to achieve a 30 percentage point increase in segment margin, leading to more consistent returns. This aspect of the business is seen as an additional growth driver that could enhance Ormat's market position.

Based on these developments and the introduction of fiscal year 2026 estimates, the analyst expressed a positive outlook on Ormat Technologies. The company is perceived as an undervalued player in the renewable energy sector, particularly in the market for base-load zero-emissions power. The increase in the price target to $85 reflects this optimism and the anticipated financial improvements over the coming years.

In other recent news, Ormat Technologies reported a significant financial uptick in Q1 2024. The company witnessed a 21% rise in total revenues, a 25.5% increase in earnings per diluted share, and a 14.4% growth in adjusted EBITDA compared to the same period last year. These developments were attributed to organic growth, operational efficiencies, and strategic acquisitions, notably from Enel (BIT:ENEI) Green Power North America.

Furthermore, Ormat has expanded its renewable energy capacity, adding 130 megawatts of new generating capacity. It also signed a 30-year power purchase agreement in Guadeloupe and reported strong demand for renewable energy from data centers. The company's energy storage segment is also performing well with several projects underway.

Ormat has revised its CapEx budget for 2024 up to $550 million to $570 million due to increased demand for storage projects. The company anticipates a 7% increase in total revenues and a 10% increase in adjusted EBITDA year-over-year. These recent developments indicate that Ormat Technologies is on a positive trajectory.

InvestingPro Insights

Recent analysis from InvestingPro indicates that Ormat Technologies (NYSE: ORA) is showing promising financial metrics and analyst sentiment. Four analysts have revised their earnings estimates upwards for the upcoming period, signaling confidence in the company's performance. Additionally, Ormat is trading at a low P/E ratio relative to near-term earnings growth, which could suggest that the stock is undervalued at its current price. This aligns with the positive outlook from Oppenheimer, as the company's strategic initiatives seem poised to enhance profitability and shareholder value.

InvestingPro Data further reflects Ormat's financial health, with a robust revenue growth of 18.03% over the last twelve months as of Q1 2024. The company also boasts a solid gross profit margin of 30.72%, underpinning its operational efficiency. Moreover, Ormat has maintained its dividend payments for an impressive 20 consecutive years, providing a steady income stream to investors. With these metrics in mind, the company's focus on accelerating geothermal project development and expanding its energy storage segment could indeed translate into higher returns and a stronger market position as projected.

For readers interested in a deeper dive into Ormat Technologies' financials and strategic positioning, additional InvestingPro Tips are available, offering comprehensive analysis to guide investment decisions. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and uncover more insights that could be pivotal in assessing Ormat's investment potential.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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