UBS analysts raises price target of Origin Energy (ASX: ORG)

Investors in Australia's Origin Energy (ASX: ORG) are closely monitoring the market as the company's shares experienced a dip of 1.17% on 1 February 2024, to close at AU$8.42. Amidst this market movement, UBS analysts have taken a bold stance, raising the price target for Origin stock to AU$9.60 from AU$7.40 and reinstating a "buy" rating. Let's delve into the details and understand the factors influencing this shift.

UBS Analysts' Optimism: A Boost for Origin Stock

Analysts at UBS have demonstrated confidence in Origin Energy's potential by elevating the price target. The revised target of AU$9.60 signals an optimistic outlook, surpassing the previous AU$7.40 valuation. This upgrade is coupled with a reaffirmed "buy" rating, indicating UBS's belief in the company's growth trajectory.

Strengthened Earnings Projections: A Positive Outlook

One of the driving factors behind UBS's bullish stance is the upward revision of earnings estimates for fiscal years FY24, FY25, and FY26. The brokerage has increased these estimates by 5%, 4%, and 3%, respectively. The rationale behind these adjustments lies in the anticipation of robust cash distribution. UBS projects Origin Energy to generate over AU$1.5 billion ($985.80 million) in cash from Australia Pacific LNG (APLNG) between 2024 and 2025.

Strategic Shift: Origin's Plan to Exit Coal Profitably

UBS's favorable view of Origin Energy extends beyond financial metrics. The brokerage acknowledges the company's strategic initiative to exit coal profitably. Origin's approach involves the construction of high-return utility-scale batteries and securing additional contracted renewable offtake. This deliberate shift aligns with the global push towards sustainable energy sources and positions Origin Energy as a key player in this transition.

Analyst Consensus: Favorable Ratings and Price Target

LSEG data reveals that out of six analysts covering Origin stock, four recommend a "buy" or a higher rating, while the remaining two suggest a "hold." The median price target stands at AU$9.26, reinforcing the positive sentiment among analysts. This collective outlook underscores the market's confidence in Origin Energy's future performance.

In conclusion, Origin Energy's recent stock fluctuations, accompanied by UBS's optimistic assessments, highlight the dynamic nature of the energy market. The strategic moves towards renewable energy and the positive earnings projections contribute to a narrative of resilience and growth. Investors are encouraged to stay attuned to ongoing developments as Origin Energy navigates an evolving landscape.