The Origin Energy Ltd (ASX: ORG) share price has jumped in value in July as investor confidence continues to climb higher. Macquarie Group Ltd (ASX: MQG) has raised its target price to match.
As of 2pm today, the energy generator and retailer's share price is trading 0.04% higher for the day, at $11.635 a piece.
The company's share price has experienced several peaks and troughs throughout the past year, but has hiked 7.53% over the past week, landing it 9.25% higher for the year to date.
Here's where Macquarie thinks Origin Energy shares will go next.
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Macquarie's outlook on Origin Energy
In its latest note to investors, the broker maintained its neutral rating of the utility company but has raised its price target to $10.94, up from $10.12. While higher, the new price target still represents a potential 5.97% downside for the stock over the next 12 months.
The key catalyst for the raise is based on a lift in valuation for Kraken Technologies. Octopus Energy announced plans to spin off its technology arm, Kraken Technologies, earlier this month. Origin Energy holds a 23% stake in Octopus Energy so the demerger could help boost its value.
The demerger is expected to occur within the next year. Recent assessments estimate that Kraken Technologies could be valued at around £10.25 billion ($21.32 billion). The valuation would position the entire Octopus Energy Group, including its retail supply operations, at approximately £15 billion ($31.19 billion) or higher.
Macquarie's previous valuation of the group was £9.1 billion ($18.92 billion).
"We have reconsidered our Octopus Energy valuation, lifting it from £9bn to £12bn, with no change in OE with the uplift associated with Kraken. Our longer-term margin assumption is now 15% higher, at +80%," Macquarie said in its 9 July investor note.
The broker also noted:
Clarity on the near-term growth opportunities in retail, newly launch C&I and water/broadband may provide confidence for upgrades. As it is, the Kraken FY26E EV/EBITDA multiple is 57x, at a similar level to companies like Wisetech.
Upside to the valuation is around additional disclosure on the current business plans and where it is tracking. The recent profit warning by Origin around Octopus highlights the lack of visibility provided.
An overall increase in energy market performance has also created a tailwind for Origin Energy.
"Energy markets (EM) have performed ahead of expectations, albeit June was not necessarily a strong month as coal was flat and last year benefited from the wind drought," the investor note said.
However, we increase FY26E ~$75m, reflecting better pricing outcomes. Retail performance also appears stronger, with 3Q numbers +20k wins across the markets (Kraken delivering). ORG is also doing more disconnections in markets like Vic.
