Goldman Sachs Boosts Drax to 'Buy' on Data Center Hopes

Goldman Sachs has upgraded Drax Group to 'Buy' from 'Neutral', citing strong cash flow visibility and data center development potential. The bank lifted its 12-month price target to 1,020p from 924p, implying an upside of roughly 31.6% from the stock's previous close at 775p.

The analysts noted that market perceptions of Drax as a low-multiple company heavily reliant on government biomass subsidies expiring in 2031 are outdated. Recent investments in flexible generation, battery storage, and solar assets have transformed its long-term earnings profile.

Goldman Sachs forecasts Drax will generate approximately £3.5 billion in cumulative free cash flow between 2025 and 2031, equivalent to 1.4 times its current market capitalization. The bank projects that Drax will return about one-third of that cash - equivalent to 50% of its current market cap - to shareholders through dividends and share buybacks.