Amplitude Energy Limited (ASX:AEL) is experiencing a surge in investor attention following a recent upgrade by Goldman Sachs from Neutral to Buy, accompanied by a price target of A$0.26.
The Amplitude Energy share price closed out the day at A$0.23, bringing the gains since the start of the year to 15%. This came along with AEL hitting 52 week highs of A$0.24 on the day.
Goldman Sachs’ upgrade is predicated on a compelling growth narrative, forecasting a greater than 90% increase in EBITDA over the next three years. This anticipated surge is primarily attributed to the stabilization of production at the Orbost Gas Plant and the advantageous re-pricing of legacy gas contracts.
The Orbost plant, which has faced operational challenges in the past, is now expected to deliver consistent output, providing a reliable revenue stream for Amplitude Energy. Simultaneously, the renegotiation of existing gas contracts is poised to unlock higher prices, significantly boosting the company’s profitability.
The upgrade from Goldman Sachs is not an isolated event. Earlier this year, Bell Potter Securities also upgraded Amplitude Energy to a Buy rating, further solidifying the positive sentiment surrounding the company. Bell Potter’s analysis, conducted in late March, suggested a potential upside of over 60% based on an average one-year price target of A$0.28.
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Amplitude Energy, formerly known as Cooper Energy Limited, has undergone a strategic transformation in recent years. The company’s shift in focus, coupled with its rebranding in November 2024, reflects a renewed vision and commitment to growth. The company primarily generates revenue from gas supply in Southeast Australia and oil production from the Cooper Basin, providing a diversified portfolio within the energy sector.
Despite the positive outlook, investors should be mindful of the inherent risks associated with the energy sector.
Commodity prices are volatile and can be influenced by a myriad of factors, including geopolitical events, weather patterns, and changes in global demand. Furthermore, the Orbost Gas Plant, while now expected to operate stably, has a history of operational challenges, and any future disruptions could negatively impact the company’s earnings. The company is also subject to regulatory and environmental risks, which can impact its operations and profitability.
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