Jefferies, the investment bank, has upgraded its rating on Fervo Energy shares from 'Hold' to 'Buy', citing attractive valuation levels following recent price weakness. The upgrade, issued on Monday, sent the stock higher in early trading, with shares climbing approximately 4% to $34.20 by midday in New York. Analysts noted that the company's enhanced geothermal systems technology positions it well for long-term growth in the renewable energy market.
The upgrade comes as Fervo Energy, a US-based geothermal developer, continues to expand its project pipeline. Jefferies highlighted that the stock now trades at a discount to its peer group, offering a compelling entry point for investors. The firm also pointed to Fervo's recent operational milestones, including successful drilling programmes, as underpinning its improved outlook.
For UK investors with exposure to global clean energy funds or US equities, the move signals growing confidence in geothermal power. Unlike solar or wind, geothermal provides baseload electricity, making it an attractive complement to intermittent renewables. UK pension funds and institutional investors have increasingly allocated capital to geothermal assets as part of their net-zero strategies.
The broader clean energy sector has faced headwinds this year, with the S&P Global Clean Energy Index down about 12% year-to-date amid higher interest rates and policy uncertainty. However, geothermal stocks have outperformed, with the sector up roughly 8% over the same period. Analysts at Jefferies expect Fervo to benefit from long-term power purchase agreements and potential US government support for next-generation geothermal projects.
Fervo Energy, founded in 2017, has raised over $500 million from investors including Capricorn Investment Group and DCVC. The company is developing projects in Utah and Nevada, with plans to supply electricity to corporate buyers including Google. The upgrade reflects a broader view that valuation-driven opportunities in niche clean energy subsectors may appeal to risk-tolerant investors.