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Why Ormat Technologies Stock Is Powering Down Today
Key Points
UBS revised both its rating and price target on Ormat Technologies.
Ormat projects a 2028 revenue run-rate of $1.225 billion to $1.275 billion.
Investors seeking renewable energy exposure may prefer an ETF that includes Ormat among its holdings.
After dropping 10.3% in September, shares of geothermal specialist Ormat Technologies (NYSE:ORA) are continuing to dip on the first day of trading in October.
As of 3:23 p.m. ET, shares of Ormat are down 2%, recovering from an earlier 4.8% decline.
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This firm doesn't see much growth in the next two years
Downgrading it to neutral from buy, UBS lowered its price target on Ormat stock to $100 from $157. Based on Ormat's closing price of $91.49 yesterday, the new price target implies 9.3% upside.
According to Thefly.com, UBS based its actions on the belief that the stock now has a balanced risk/reward profile after the company reduced its 2028 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) run rate guidance by 3% during an investor presentation in early September, reflecting limited margin improvement until 2029.
For 2028, Ormat anticipates a 2028 revenue run rate of $1.225 billion to $1.275 billion and an adjusted EBITDA run rate of $750 million to $800 million. In 2025, Ormat reported revenue and adjusted EBITDA of $990 million and $582 million, respectively.
What's a green energy investor to do now?
Putting the UBS price target aside, investors should recognize that the company's modest growth expectations, coupled with the fact that the stock already trades at a rich valuation of 33.8 times forward earrnings suggests that now's not a great time to load up on Ormat shares. For those committed to geothermal, a renewable energy exchange-traded fund (ETF) that includes Ormat among its holdings may be a better option.
Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.