It has been a great few weeks for this unloved energy company…
The post Why the Origin (ASX:ORG) share price is up 20% in a month appeared first on The Motley Fool Australia. –
Since this time last month, the energy company’s shares have risen an impressive 20%.
Why is the Origin share price on fire?
Investors have been buying the company’s shares despite there being no news out of it during the period in question.
However, there has been a lot of broker activity which could be having a positive impact on the Origin share price.
For example, at the start of June, a note out of Macquarie Group Ltd (ASX: MQG) reveals that its analysts believe the worst may be over for the company.
It commented: “The negative earnings cycle appears to be nearing the bottom, with strength in power prices positive to FY 2022 and FY 2023 earnings outlook.”
Macquarie notes that electricity prices have returned to the $50-$60/MWh range in New South Wales and Queensland. In addition, the Brent crude oil price has been improving strongly on demand hopes, recently hitting a two year high of US$74 a barrel.
In light of this, the broker retained its outperform rating and lifted its price target to $4.88.
Is anyone else positive on Origin?
Another leading broker is even more bullish on the Origin share price. Earlier this month, Ord Minnett retained its buy rating and increased its price target on its shares to $5.75.
This price target implies potential upside of 18.5% over the next 12 months excluding dividends. If you include them, the potential return stretches to ~23%.
According to the note, the broker has increased its earnings estimates to reflect higher electricity price forecasts. In addition, based on current spot prices, the broker is expecting its APLNG operation to generate strong free cash flow.
All in all, this makes Origin the broker’s top pick in the sector right now.
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James Mickleboro does not own any shares mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.