Ormat Q2 Shows Strength, But Valuation Remains Full

What happened

Ormat's Q2 2026 results revealed accelerating momentum, with revenue rising 10.6% and adjusted EBITDA up 6.9%, while management raised full-year guidance to $1.15–$1.20 billion in revenue and $630–$650 million in adjusted EBITDA, above prior ranges. The storage segment was a standout, with revenue nearly tripling to $42.8 million, though management cautioned that margins will normalize in the second half. This follows a period of heavy capital deployment and project execution, including the Shirk storage facility reaching commercial operations and continued progress on geothermal recontracting. However, the company still faces significant near-term requirements: a $587 million remaining 2026 capex plan, a $90 million tax-credit monetization target, and a potential Series B convertible repurchase option in March 2027. While the raised guidance and storage growth validate the diversification strategy, the stock's valuation at roughly 18x EV/EBITDA and over 50x earnings leaves little room for error.

Implication

Over a 6–12 month horizon, Ormat's ability to deliver on its raised guidance and avoid project delays will be critical, with the Nevada PUC approval for the Google/NV Energy geothermal portfolio as a key binary catalyst. The storage business, while growing rapidly, must demonstrate margin stability as merchant volatility and tariff risks persist. The company's liquidity remains adequate, but the $587 million remaining capex and the March 2027 convertible repurchase option require disciplined capital management; any sign of equity issuance would pressure the stock. If execution stays on track and the AI-linked geothermal story advances, shares could re-rate toward the $130–$145 range, but that assumes multiple expansion beyond current levels. Conversely, any slip in project timelines or financing stress could push the stock back below $100, making a patient, selective approach more prudent than chasing the recent strength.

Thesis delta

The prior WAIT thesis emphasized execution risk and valuation, with an attractive entry near $95 and a trim level above $135. The raised 2026 guidance and strong Q2 storage results modestly improve the near-term earnings visibility, shifting our stance to a neutral-to-positive HOLD, but we are not yet convinced the premium is justified. The core bull case now hinges on sustained storage growth with acceptable margins and a timely Nevada PUC approval, while the bear case remains centered on financing overhangs and the rich multiple.