The Origin Energy Ltd (ASX: ORG) share price is plunging lower on Friday despite a top broker predicting big things to come.
UBS has retained its bullish view of the stock despite its first half earnings detailing a rough period for the company.
At the time of writing, the Origin share price is $5.74, 6.74% lower than its previous close.
For context, the S&P/ASX 200 Index (ASX: XJO) is currently also down, having slipped 0.5%.
Origin's dip follows today's non-price sensitive announcement from the company stating it has completed a sale of a 10% interest in Australian Pacific LNG (APLNG).
Here's what UBS analysts are saying about the energy stock's future.
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What does UBS think of Origin's first half earnings?
The Origin share price is suffering despite UBS' positivity on its future.
Origin released its earnings for the first half of financial year 2022 yesterday.
Within them, it announced its statutory net profit after tax (NPAT) had risen to $248 million – notably below UBS' guidance.
As The Australian reports, the broker expected the company's half year profits to reach $354 million.
Additionally, analysts Tom Allen and Joseph Wong were disappointed Origin hadn't increased its Energy Markets guidance and provided lower-than-expected guidance for its stake in APLNG.
Its Energy Market's guidance for financial year 2022 is still $450 million to $600 million of earnings before interest, depreciation, amortisation, and tax (EBITDA).
Meanwhile, Origin expects to receive $1.1 billion of cash flows from APLNG.
However, UBS isn't worried. The publication quoted the analysts as saying the company's earnings "appeared positive overall."
Additionally, the broker is excited about yesterday's major news from Origin.
What will Eraring's closure mean for Origin shares?
Origin has decided to close the doors of its Eraring coal-fired power station in 2025 – 7 years earlier than previously expected.
In its place, Origin will build what could be a 700-megawatt battery.
The UBS analysts said the plan will likely "create value for shareholders".
"[T]he prevailing economics for Eraring face significant headwinds from increased renewable generation capacity, and thermal coal price exposure," they said.
As more renewable generation capacity enters the market, volatility in intraday price spreads increases. This means the economics for baseload coal-fired generators, like Eraring, will be increasingly challenged as they cannot react to the low wholesale prices during the middle of the day.
What does the broker expect from the Origin share price?
UBS has retained its high expectations of the Origin share price despite its softer-than-expected first half.
It still rates the stock as a 'buy' and has slapped it with a price target of $6.65.
That represents a 15.8% upside on the currently Origin share price.
