European stocks retreat on tech valuation concerns; U.K. economic woes
Investing.com - Morgan Stanley downgraded Fortum OYJ (HE:FORTUM) (OTC:FOJCY) from Equalweight to Underweight while raising its price target to EUR18.00 from EUR15.00. The Finnish energy company currently trades at a P/E ratio of 19.9 with a dividend yield of 3.16%, according to InvestingPro data.
The Finnish energy company’s shares have rallied 46% year-to-date, including a 35% gain since early September, as market expectations increased ahead of Fortum ’s Capital Markets Day scheduled for November 25. InvestingPro data shows an even stronger YTD return of 75.57%, with the stock now trading near its 52-week high.
Morgan Stanley believes Fortum needs to announce a significant data center deal at its upcoming event to justify its current valuation and support further share price gains, warning that limited news could trigger a market correction.
The investment bank expressed concerns about Fortum’s ability to time such a deal to coincide with the Capital Markets Day and noted the company’s historical reluctance to disclose pricing details on power purchase agreements.
While Morgan Stanley does not expect a complete reversal of the data center growth thesis if the event disappoints investors, it sees an increasingly difficult path to further upside and believes the risk is now skewed to the downside.
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