Bernstein cuts Orsted stock rating to Market Perform, PT steady

On Monday, Bernstein analysts adjusted their stance on Orsted A/S (CSE:ORSTED:DC) (OTC: DNNGY (OTC:DNNGY)), a prominent player in the Independent (LON:IOG) Power & Renewable Electricity Producers industry with a market capitalization of $19.62 billion, shifting the stock rating from Outperform to Market Perform, while maintaining the price target at DKK 395.00. The revision follows a notable increase in the company’s stock price, prompted by a recent announcement of a reduced capital program in February 2025. According to InvestingPro data, the company maintains strong liquidity with a current ratio of 1.48, though it faces cash burn challenges.

The analysts at Bernstein highlighted that Orsted’s shares have experienced approximately a 14% surge since the reduced capital program was unveiled earlier this year. However, InvestingPro data reveals a broader context, showing the stock has declined by 28.51% over the past six months, with a current trading price of $15.55. Despite this positive performance, the analysts expressed concerns regarding the current valuation, suggesting that the stock now presents a less compelling risk-reward balance for investors. InvestingPro analysis indicates a poor free cash flow yield, supporting these valuation concerns.

The cautionary stance is partly due to Orsted’s significant operational and political challenges in the United States, where 20% of its current construction program capacity is located. The offshore wind sector in the U.S. is considered particularly complex, both operationally and politically, which Bernstein believes warrants a more substantial discount to account for these heightened risks.

In their commentary, Bernstein analysts stated, "After a c.14% run-up since the publication of a reduced capital program in February 2025, we now see the stock offering a less attractive risk: reward for investors who still need to shoulder the risks of a twin construction and divestment program." The analysts elaborated on the need for a deeper discount to justify a more constructive view on the stock.

The unchanged price target of DKK 395.00, despite the downgrade, indicates that Bernstein’s valuation of Orsted’s prospects remains steady. However, the firm’s analysts are advocating for a more cautious approach to the stock, given the current market dynamics and the specific challenges Orsted faces in the U.S. market. InvestingPro subscribers have access to 8 additional key insights about Orsted, including detailed analysis of its financial health, growth prospects, and comprehensive valuation metrics through the Pro Research Report, helping investors make more informed decisions in this complex market environment.

In other recent news, Orsted A/S has seen significant changes in its stock ratings and price targets from major financial institutions. BofA Securities downgraded Orsted’s stock from Buy to Neutral, reducing the price target from DKK410 to DKK350. This adjustment reflects concerns over Orsted’s strategic shift towards completing ongoing projects and improving its capital structure, which BofA anticipates will lead to lower earnings and growth. Similarly, Citi analyst Jenny Ping also revised Orsted’s price target, cutting it from DKK428 to DKK300 while maintaining a Neutral rating. Ping highlighted the company’s financial challenges and the potential impact of strategic decisions, such as asset sales or equity raises, on its balance sheet.

Citi’s analysis points to a funding gap of approximately DKK30 billion, despite potential asset sales, which may lead to Orsted owning fewer assets in the future. Both BofA and Citi have expressed concerns about Orsted’s financial health and the risks posed by market conditions, including high interest rates and political factors affecting renewable energy investments. These recent developments underscore the complexities Orsted faces as it navigates its current strategic and financial landscape.

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