OPAL Fuels: Sell Rating Affirmed Amid Financial Shortfalls and Market Expectation Mismatches

Analyst Adam Bubes of Goldman Sachs maintained a Sell rating on OPAL Fuels (OPAL – Research Report), retaining the price target of $5.00.

Adam Bubes has given his Sell rating due to a combination of factors that indicate OPAL Fuels may not meet market expectations. Despite the company reiterating its guidance for 2024 and showing progress with its landfill gas projects, its first-quarter EBITDA fell short of both consensus and Goldman Sachs’s estimates. The lower-than-expected EBITDA can be attributed to underperformance in the Fuel Station Services and Renewable Power segments, although this was slightly offset by better results in the RNG Fuel EBITDA. Furthermore, while OPAL’s reaffirmation of its EBITDA guidance for 2024 demonstrates confidence, it notably aligns with the lower end of Goldman Sachs’s expectations and does not provide an upside surprise that might have been anticipated by the market.

Additionally, the report reflects on the company’s strong execution on its in-construction landfill gas projects and the commencement of a new project with Waste Management; however, these operational advancements do not seem sufficient to counterbalance the financial shortfalls. OPAL’s ability to meet or exceed its construction targets for the year is noted, and while this could be seen as a positive, it appears that the current financial returns and multiples do not justify a more favorable rating. As such, the Sell rating suggests that the stock may not offer significant growth or value at its current price and given the information available, it may not be an attractive investment in the near term.

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OPAL Fuels (OPAL) Company Description:

ArcLight Clean Transition Corp II is a blank check company.