Barclays upgrades Ormat Technologies stock rating citing power demand

On Friday, Barclays analysts upgraded Ormat Technologies (NYSE: NYSE:ORA) stock rating from Equalweight to Overweight. The analysts also raised the price target to $86 from $80, highlighting the increasing demand for geothermal energy as a key factor. Currently trading at $75.12 with a market capitalization of $4.6 billion, InvestingPro analysis suggests the stock is trading above its Fair Value, with analyst targets ranging from $75 to $100.

Barclays pointed out that the U.S. is facing a significant power shortage, driven by the rapid expansion of data centers, which require over 1GW of power. This situation has brought attention to geothermal energy as a crucial baseload clean energy source. According to Barclays, the U.S. needs to build 300-400 GW of power capacity by 2030 to meet the projected demand from data centers. However, only 70-75 GW is expected to be added, leading to a substantial power gap. With an overall Financial Health score of ’FAIR’ according to InvestingPro, Ormat has maintained consistent revenue growth with a 5-year CAGR of 3%.

The shortage has prompted hyperscale companies to secure their power needs, resulting in increased prices for power purchase agreements (PPAs), which have reached $100/MWh in some instances. Barclays noted that Meta (NASDAQ:META) recently signed a 20-year PPA with Constellation for 1,121 MW to power its data center in Illinois, underscoring the growing demand for reliable energy sources.

Ormat Technologies, the largest owner and operator of geothermal power plants in the U.S., stands to benefit from this trend. The company is engaged in discussions with data center customers to supply geothermal power, and several of its long-term PPAs are expected to reprice at the end of the decade.

Barclays emphasized Ormat’s defensive position within the sector, with over five years of earnings visibility. In uncertain times, the analysts expect Ormat to outperform more cyclical companies. The company has maintained dividend payments for 21 consecutive years, demonstrating strong financial stability. For deeper insights into Ormat’s performance and potential, InvestingPro offers a comprehensive research report with additional metrics and expert analysis, available as part of its coverage of 1,400+ US stocks.

In other recent news, Ormat Technologies reported a robust performance in the first quarter of 2025, surpassing market expectations with earnings per share of $0.66, compared to the projected $0.5963. The company’s revenue also exceeded forecasts, reaching $229.8 million, a 2.5% increase year-over-year. Additionally, Ormat has entered into a $62 million Hybrid Tax Equity partnership with Morgan Stanley Renewables Inc., which includes the development of energy storage and solar projects scheduled to be operational by the end of 2025. These projects are part of Ormat’s strategy to optimize project economics and leverage Investment Tax Credits.

Ormat Technologies also announced significant executive appointments to strengthen its management team, with Aron Willis joining as Executive Vice President, Electricity Segment, and Daniel Moelk set to join as Senior Vice President, Resources, Drilling, & EGS in July 2025. These appointments are aimed at advancing the company’s strategic objectives, particularly in the Enhanced Geothermal System (EGS) development. The company continues to focus on expanding its geothermal and energy storage segments, with future revenue guidance for 2025 set between $935 million and $975 million.

Ormat’s CEO, Doron Blachar, emphasized the company’s commitment to growth, highlighting the importance of these initiatives in supporting their innovation and profitability. The recent developments reflect Ormat’s ongoing efforts to strengthen its position in the renewable energy sector and capitalize on increasing energy storage demands.

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