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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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.
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.
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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.