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Investing.com - Morgan Stanley (NYSE:MS) upgraded Orsted A/S (CSE:ORSTED) (OTC:DNNGY) from Equalweight to Overweight on Monday, while raising its price target to DKK360.00 from DKK340.00. The company, currently trading at $14.69, is showing signs of undervaluation according to InvestingPro analysis, despite its relatively high P/E ratio of 103.7x.
The upgrade comes as Morgan Stanley expects a turning point in the renewables cycle, with investors looking for laggards within the outperforming European utilities sector. As a prominent player in the Independent (LON:IOG) Power & Renewable Electricity Producers industry, Orsted maintains strong liquidity with a current ratio of 1.24.
The firm cited several positive developments, including U.S. Budget reconciliation on IRA tax credits that landed "significantly better than the market had feared" and the restart of Equinor’s NY Empire Wind project after an April 25 halt order.
Morgan Stanley now sees a lower probability that Orsted’s Sunrise and Revolution projects will be canceled, noting that the majority of offshore construction at Revolution is expected to complete this year, ahead of its second half 2026 commercial operation date.
The firm expects Orsted’s August 13 second-quarter results to be "the last messy quarter," which will include one-off charges related to the Hornsea 4 cancellation.
In other recent news, Citi analysts have downgraded Orsted A/S from Neutral to Sell, significantly lowering the price target from DKK300.00 to DKK211.00. The downgrade is attributed to concerns over Orsted’s balance sheet and its strategy for funding projects in the United States. Analysts pointed out that Orsted has been relying on selling operating cash flows to fund its U.S. ventures and has canceled potentially valuable projects, including Hornsea 4. Citi highlighted risks such as potential delays, capital expenditure overruns, and tariff impacts on Orsted’s U.S. projects. The possibility of a cease-to-develop order, similar to the one affecting the Empire Wind project, was also mentioned. Orsted’s stock is currently trading at a price-to-book value of 1.1 times, higher than the 0.7 to 0.8 times average of its peers in the renewable energy sector. Citi’s analysts expressed concerns about the stock’s premium valuation given the uncertain U.S. outlook, contributing to their decision to downgrade the stock. They emphasized that the removal of Hornsea 4 from their valuation and potential tariff-related capital expenditures further justify the reduced price target.
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