Buy ‘underappreciated’ Origin Energy shares for 20% upside: Morgan Stanley

The Origin Energy share price has soared 30% in the last year but it could still have more upside, according to Morgan Stanley.

Today, Origin shares are currently down 3.53%, fetching $7.38 apiece. For perspective, the S&P/ASX 200 (ASX: XJO) is 0.04% in the green at the time of writing.

Let’s check the outlook for the Origin Energy share price.

What’s ahead?

Analysts at Morgan Stanley have upgraded the Origin Energy share price to “overweight”.

The broker has placed an $8.88 price target on Origin shares. This implies an upside of 20.3% based on today’s price.

Morgan Stanley believes Origin Energy, along with its utilities peer AGL Energy Ltd (ASX: AGL), is “underappreciated”, The Australian reported.

The broker now has “higher conviction in the company’s access to capital, and its ability to monetise the opportunities” amid the energy transition towards decarbonisation.

However, the broker is wary of fuel price volatility, natural disasters, unpredictable weather, and government policy intervention, the publication noted.

Update on potential acquisition

Meanwhile, a consortium conducting due diligence ahead of a potential takeover of Origin Energy now has more time.

Origin received a non-binding proposal from the consortium to acquire all of Origin’s shares at a price of $9 cash per share in November.

The consortium is made up of Brookfield Asset Management and affiliates, along with Mid Ocean Energy — an LNG company formed by EIG Partners.

Origin advised today the consortium is “working to complete its due diligence and has requested additional time to do so”. Exclusivity will now end on 24 January, a week from today.

Origin said:

At this stage shareholders do not need to take any action. Origin will continue to keep shareholders updated in accordance with its continuous disclosure obligations as its engagement with the Consortium continues.

In December, Origin Energy granted the consortium an extension on the exclusivity to 16 January to complete due diligence over the holiday period.

Share price summary

The Origin Energy share price has slid 3.95% this year so far, but it has climbed 2.42% in the last month.

In the past week, Origin shares have lost 3.7%.

Origin has a market capitalisation of about $12.8 billion based on the current share price.

The post Buy ‘underappreciated’ Origin Energy shares for 20% upside: Morgan Stanley appeared first on The Motley Fool Australia.

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Motley Fool contributor Monica O’Shea has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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