S&P 500 may face selling pressure as systematic funds reach full exposure
On Thursday, Barclays began covering Nordex SE (NDX1:GR) (OTC: NRDXF), a wind turbine manufacturer, assigning an Equal Weight rating to the stock with a price target of EUR15.10. The firm highlighted the company's potential to capitalize on the robust European market and the additional volume expected from the restart of its U.S. facility.
The analyst pointed out that Nordex could see reduced cost pressures as it completes its low-margin legacy contracts by the end of 2024. Additionally, the potential easing of freight cost inflation and a sustained benefit from importing deflation from China could contribute positively to the company's financial health through 2025.
Despite these optimistic views, Barclays also noted potential challenges for Nordex, including intensified competition from Chinese wind Original Equipment Manufacturers (OEMs) and Siemens Energy's re-entry into the market. Furthermore, the firm expressed caution regarding the potential Inflation Reduction Act (IRA) credits associated with Nordex's U.S. operations, suggesting that free cash flow (FCF) generation might not meet consensus expectations in 2025 due to warranty provision headwinds.
Barclays summarized its stance by acknowledging the potential for a margin recovery story at Nordex. However, the firm emphasized the importance of not overlooking the risks that could impact the company's performance. The newly set price target of EUR15.10 reflects Barclays' balanced perspective on Nordex's prospects.
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