Orsted shares soar as M. Stanley upgrades to Overweight on improving risk-reward

Investing.com -- Morgan Stanley (NYSE:MS) on Monday upgraded Orsted (CSE:ORSTED) shares to Overweight from Equal-weight, citing an improving risk-reward profile supported by falling risks in the U.S. offshore wind segment and attractive valuation.

The company’s shares surged more than 8% in Copenhagen trading as of 09:00 GMT. 

The Wall Street firm also raised its price target to DKr 360 from DKr 340, implying 20% upside from the current levels. 

The analysts believe concerns over Orsted’s troubled U.S. projects—Revolution and Sunrise—have been overly priced in.

“We see an inflection in the Renewables cycle as investors search for laggards within outperforming European Utilities, and re-engage following material cleansing events from the key U.S. market,” analyst led by Robert Pulleyn wrote.

They also pointed to the recent resumption of Equinor’s Empire Wind project and improved clarity around U.S. tax credits as supporting sentiment.

Valuation remains a key part of the call. Orsted is seen as the “cheapest Renewable Energy Sources (RES)-exposed stock” in terms of 2026 EV/EBITDA, and the note highlights a “further DKK 75/sh of missing value” in non-U.S. projects like Changhua and Hornsea 3 that the market is failing to recognize.

The stock has also sharply underperformed its peers, making it a standout laggard among RES names both year-to-date and since the April lows.

Morgan Stanley estimates the stock is effectively assigning zero value to U.S. projects and penalizing the company for future capex.

“Whilst Orsted remains a ‘show me story’ we expect progress on legacy projects and delivering asset farmdowns to strengthen balance sheet will trigger re-rating from overly depressed valuation,” the analysts continued.

The company’s execution represents a key driver behind the upgrade. Morgan Stanley notes the Revolution project is 75% complete, while Sunrise is 35% complete, with both benefiting from IRA tax credit support.

Progress on asset disposals—already DKK 27 billion of the DKK 70-80 billion target—should help ease leverage concerns. The analysts also flagged Orsted’s upcoming second-quarter results, due August 13, as an important checkpoint, expected to mark the last messy quarter following earlier charges.

Morgan Stanley’s bull case, which assigns full value to the U.S. offshore projects Revolution and Sunrise, stands at DKr 500, reflecting significant upside if these assets are successfully de-risked and completed.

In contrast, the base case remains conservative, excluding these projects from the valuation and continuing to discount their remaining capex due to ongoing market skepticism.

The bear case, lifted from DKr 200 to DKr 220, assumes persistent U.S. challenges and includes only partial value for non-U.S. projects like Changhua and Hornsea 3, highlighting the downside risk if execution setbacks or policy disruptions materialize.