Siemens Energy downgraded to Sell by UBS, valuation concerns amid ambitious growth targets

Published 20/01/2025, 10:28
Siemens Energy downgraded to Sell by UBS, valuation concerns amid ambitious growth targets

On Monday, UBS analyst Supriya Subramanian adjusted the rating for Siemens Energy AG (ETR:ENR1n) (ENR:GR) (OTC: SMEGF), moving it from Neutral to Sell. The price target was also revised to EUR 38.00, up from the previous EUR 23.00. Subramanian's assessment is based on the significant rise in Siemens (ETR:SIEGn) Energy's shares, which surged by more than 320% in 2024.

This increase was attributed to the robust performance of its Gas Services (GS) and Grid Technologies (GT) divisions, along with the progress made in the turnaround of Siemens Gamesa.

Despite the past success, UBS expressed concerns that the current share price might fully reflect these positive developments while underestimating the risks associated with the margin turnaround in the Siemens Gamesa business. As a result, the firm has downgraded the stock and set a new price target that suggests a more cautious outlook.

The UBS analyst pointed to a reverse Sum of the Parts (SoTP) valuation, estimating that the market is valuing Siemens Gamesa at over EUR 13 billion in enterprise value, which may be overly optimistic given the potential challenges ahead. Additionally, a reverse Discounted Cash Flow (DCF) analysis implied that the stock price is factoring in a terminal growth rate higher than 5%, which exceeds UBS's estimate of 3% and the forecasted sales Compound Annual Growth Rate (CAGR) for 2024-2028 of almost 15%, compared to UBS's expectation of 7.8% and consensus estimates of 8.8%.

Subramanian highlighted that Siemens Energy shares are trading at a 12-month forward EV/EBIT multiple of 28 times, representing a premium of more than 100% compared to the sector. The shares also reflect a full valuation of approximately 16.5 times EV/EBIT when discounting the expected EBIT for FY28. This valuation suggests that the market is anticipating perfect execution and that Siemens Energy will achieve the higher end of its fiscal year 2028 targets. UBS's downgrade underscores a more conservative stance on the stock's future performance amidst these aggressive market expectations.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.