Shares of Origin Materials, Inc. (ORGN) surged on Friday following the company’s second-quarter earnings report and the announcement of a new contract. Despite missing earnings estimates, the company’s positive outlook and growth potential fueled investor enthusiasm.
Origin Materials reported a loss per share of $0.14, falling short of the consensus loss of $0.12. Revenue also came in below expectations at $7.03 million, compared to the estimated $7.78 million. However, the company secured a two-year Memorandum of Understanding (MOU) for PET closure production, projected to generate over $100 million in revenue. This new contract is expected to start generating significant revenue in early 2025, with a substantial increase projected for 2026.
BofA Securities analyst Steve Byrne upgraded Origin Materials to a Buy rating from Neutral, raising the price target to $3.00 from $1.35. Byrne’s bullish outlook stems from his belief in the company’s biomass conversion technology and the rapid advancement of its polyethylene terephthalate (PET) closures production. The analyst believes that the ramp-up in PET closure production has pushed the company’s EBITDA breakeven estimate forward to 2027 from 2029. He also sees potential for profitability as early as 2026 due to ongoing discussions for further contracts and licenses.
Byrne highlights the long-term potential of ORGN’s technology to convert cellulosic materials into Chloromethyl furfural (CMF) and Hydrothermal carbon (HTC). While this process may take time, CMF has the potential to produce functionally superior products like polyethylene furanoate (PEF) with potentially higher margins and lower capital expenditures compared to traditional methods. The analyst forecasts $10 million in licensing income in 2027, growing to $20 million by 2028.
In response to the positive outlook and the new contract, ORGN shares surged by 26.4% to $1.39 at the last check on Friday. This surge underscores investor confidence in the company’s future prospects and the potential of its innovative technology to disrupt the traditional manufacturing process.
