The Origin Energy Ltd (ASX: ORG) share price is in the green today. As of midday, the energy provider's shares are changing hands 0.86% higher at $11.77 a piece.
The company's share price has experienced several peaks and troughs throughout the past year, but has hiked 8.28% over the past month, landing it 11.67% higher for the year.
Here's Macquarie Group Ltd (ASX: MQG)'s stance on Origin Energy shares.
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Macquarie's outlook for Origin Energy shares
In a recent note to investors, the broker has confirmed its neutral rating and $10.94 price target on the shares.
Macquarie raised its price target last month to $10.94, up from $10.12.
Using the share price at the time of writing, the target price represents a potential 7% downside for investors over the next 12 months.
"ORG looks to be pricing much of the Kraken IPO into the share price already. Core assets like EM market and APLNG valuation outlook appears flatter," Macquarie said in its note.
Octopus Energy announced plans to spin off its technology arm, Kraken Technologies, in early July. It is expected to occur within the next year. Kraken Technologies was recently estimated to be valued at around £10.25 billion ($21.32 billion), higher than Macquarie's expectation of £9.1 billion ($18.92 billion).
While the demerger was expected to boost Origin Energy's value, Macquarie now thinks much of the new value is already priced into its share price.
Origin Energy holds a 23% stake in Octopus Energy.
Macquarie said:
Octopus customer wins are impressive especially in the UK where OE already has a leading position. International customer growth at +0.5m to 2.7m is well on the way to reach critical mass. One caution on Octopus UK is the business remains below the capital adequacy levels, with ~1.0-1.5 years of retained earnings needed to meet the standard.
What else did Macquarie have to say?
Elsewhere, core growth outlook is negative as APLNG (Australia Pacific LNG (APLNG), a joint venture between ConocoPhillips, Origin Energy, and Sinopec) contribution declines.
The broker said:
Quarterly production was as expected, but sales were 5PJ lower, and price realisations were lower, with net impact being ~$67m reduction to our EBITDA expectations. FY26 production guidance was 635-680PJ (MRE 661PJ) in line with consensus. Variation was b/e costs lifted to $2.9-3.2bn, and flagged will be structurally higher in the coming three years, as APLNG starts the process of replacing production.
Likelihood is the near-term spend will be larger when Reedy Creek, Iron Bark projects are approved. Timing is later in FY26 with the outcome of the government gas review. Impact is cashflow from FY27 onwards is likely to be lower.
The energy market had no major surprises. Origin Energy's 40,000 customer growth is indicative of some traction with Kraken; volume was as expected in electricity, albeit lower sales of commercial and industrial volume in gas.
ORG updated guidance in May, and June would have benefit from the increase in volatility in gas so the upper half of the $1.3-1.4bn range. Outlook is unchanged, with growth from lower coal costs (only 80% hedged), reduced solar FiTs and falling cost to serve.
The broker also updated its earnings guidance on the company:
Earnings changes: FY25e -3.0%, FY26e -2.8% and FY27e -1.2% reflecting lower APLNG expectations.
