Rally in this European green energy stock has further room to run: Citi

Investing.com -- Shares of German wind turbine manufacturer Nordex (ETR:NDXG) have surged more than 45% this year, staging a strong recovery after months of underperformance against the European renewable energy index (SXNP) since mid-September. 

Shares of the Hamburg-based comany were up 3.1% at 08:10 ET (12:10 GMT). 

While broader market conditions have improved, particularly with a more positive outlook for Germany’s economy, Citi Research notes that Nordex’s own execution has played a crucial role in its rebound.

With the German onshore wind market continuing to show strength, Citi Research notes that "the stars do look to be aligned for Nordex to achieve an 8% EBITDA margin in 2026E." 

Citi Research states, "We do not think this is yet in the price, meaning that on a 12-month view we think that the shares have further to run." 

As a result, Citi has raised its price target on the stock to €19 from €16 and reaffirmed its Buy rating, suggesting further gains could be ahead over the next year.

Germany remains the key driver for Nordex’s growth prospects. The agreement between the CDU and the Greens signals continued momentum for the country’s onshore wind sector, which could bolster installation volumes. 

Citi points out that the 2024 permitting pipeline stands at nearly 15 gigawatts, creating near-term upside potential for the industry. If installation volumes continue to rise, Nordex will be in an even stronger position to hit its 2026 profitability targets. 

In line with this outlook, Citi has raised its 2026 EBITDA forecast for Nordex by 13% to €654 million, reflecting the expectation that the company will reach its 8% margin target.

Citi Research highlights that it expects "continued solid execution in 2025," with guidance for an EBITDA margin of 5-7% seen as achievable. 

The brokerage anticipates that the company will begin narrowing this range from the second quarter onwards, which could provide steady support for the stock over the course of the year.

Citi’s increased price target is based on several factors. The bank has upgraded its estimates for Nordex’s financial performance in 2025 and 2026 due to improving volume trends. 

Additionally, Citi has adjusted its valuation approach, rolling forward its target EV/Sales multiple to 2026 and raising it slightly to 0.5x to account for stronger margin potential. 

Lastly, the brokerage has lowered its risk-free rate and beta in its weighted average cost of capital (WACC) calculation, bringing it down from 10.5% to 9.6%.

While the rapid rally in Nordex shares raises the possibility of short-term consolidation, Citi believes the stock remains well-positioned for further upside in the coming months. 

With continued strength in Germany’s wind energy sector and Nordex making steady progress toward its profitability goals, the rally in this European green energy stock appears to have further room to run.