Morgan Stanley starts Ormat and Fervo at Overweight in geothermal push

what happened

Morgan Stanley analysts led by Devin McDermott initiated coverage of Ormat Technologies and Fervo Energy with Overweight ratings, setting price targets of $123 for Ormat and $23 for Fervo, according to Seeking Alpha.

The bank argues that geothermal power is shifting from a niche, site-specific resource into a scalable source of round-the-clock, low-carbon electricity. Enhanced geothermal systems borrow techniques from the oil and gas industry to build engineered reservoirs in hot rock, which lies beneath roughly 85% of the U.S. at depths of 4 to 7 km.

McDermott expects the technology to reach a commercial turning point by 2030, unlocking more than $300 billion of investment. Costs have dropped quickly as drilling performance improves, following what he described as "a learning curve reminiscent of early shale development."

why it matters

Ormat remains anchored in conventional geothermal, while Fervo is a pure play on enhanced geothermal with higher execution risk. Ormat shares are down 17% year to date and Fervo has fallen 80% from its post-IPO highs in May, a pullback the analyst sees as an opening for investors.

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