Freedom initiates on Energy Recovery with a 'buy' and TP implying almost 50% upside

Freedom Broker has initiated, with a "buy" rating, on Energy Recovery, which manufactures energy efficiency technology solutions, in particular seawater desalination technologies. Growing water scarcity and stricter environmental policy are accelerating demand for sustainable infrastructure, Freedom Broker argues.

In a note seen by Oninvest, Freedom Broker has initiated coverage on Energy Recovery stock, assigning it a 'buy' rating and a target price of $19 per share, for 49% upside versus the last close (August 1).

Energy Recovery develops systems that enable the reuse of energy, like for seawater desalination and industrial wastewater treatment.

The company’s core product, the PX Pressure Exchanger, is a global leader in reverse osmosis desalination, a specialized method for purifying seawater. Freedom Broker calculates that the company has secured contracts worth roughly $46 million in Spain, Morocco, and the UAE for 2024-2025.

This segment remains Energy Recovery’s primary revenue driver. Freedom Broker thinks the firm’s early-stage solutions for industrial wastewater treatment and CO₂-based refrigeration could serve as long-term growth engines. As global water scarcity intensifies and environmental regulations tighten, demand for sustainable water infrastructure is expected to rise.

Freedom Broker identifies potential delays in major project rollouts as one of the key risks to Energy Recovery’s business. Such disruptions can skew quarterly results, making forecasting more difficult and adding uncertainty for investors. In the first quarter of 2025, the company reported a 33% year-over-year drop in revenue to $8.1 million, attributing the decline to the timing of revenue recognition on large projects.

Trade tensions pose an additional threat. Energy Recovery exports its products to China, where newly imposed import tariffs have driven up local prices. As a result of this market volatility, the company opted not to issue full-year revenue guidance for this year.

Freedom Broker's valuation is the most optimistic on Wall Street, according to MarketWatch. The consensus target price on Energy Recovery is $14.50 per share, 13% above current quotes. Of the three analysts who track the company, two have it as a "buy" and one a "hold."

The AI translation of this story was reviewed by a human editor.