UBS upgrades Fortum stock rating on Google data center deal

UBS has upgraded Fortum’s stock rating to "Neutral" from "Sell" following a significant data center deal with Google. This move comes with a raised price target of EUR24.50, up from EUR14.60. Over the past year, Fortum’s stock has surged 43%, although it currently trades above its Fair Value according to InvestingPro data, indicating potential overvaluation.

The deal is seen as Fortum’s first concrete evidence of monetizing data center opportunities, bolstering the company’s strategy in this sector. UBS analyst Wanda Serwinowska believes the agreement makes further premium deals more likely. The power purchase agreement (PPA) and higher power prices have led to a 45% increase in UBS’s 2030 earnings per share (EPS) estimate for Fortum, with a projected 13% EPS compound annual growth rate from 2025 to 2030.

Power prices in the Nordic region have increased, with Fortum’s forward-weighted average power prices for 2027, 2028, and 2029 up by 44%, 25%, and 17% respectively, driven primarily by rising TTF prices. UBS also factored in the potential for additional PPAs totaling 11TWh in its valuation, raising its 2027-2030 EBITDA estimates by 16-36%.

Despite mixed financial results in Q2 2026, with a slight drop in comparable earnings per share and operating profit, Fortum’s operating cash flow rose significantly to EUR324 million, supported by changes in working capital. The company also announced a conditional cash tender offer for Norwegian power retailer Elmera, which could potentially expand its customer base to 3.2-3.3 million.

Furthermore, JPMorgan upgraded Fortum’s stock rating from "Underweight" to "Neutral," raising the price target to EUR24.30, following a 22-year PPA with Google for a data center powered by the Loviisa nuclear plant.