This may be the perfect time to buy shares in green energy giant Ørsted, analysts at Swiss bank UBS said on Wednesday, as the winds of change accelerate as the stock fell by more than 30% in 2021.
Pressure on the renewables sector since February, amid weakening market sentiment on clean energy and other growth stocks, has recently depressed shares of Ørsted ORSTED,
although the stock remains 20% higher over the past 12 months. Surprise repair costs in April also added weight to stocks.
But now UBS UBS,
analysts upgraded the stock to buy and gave it a target price of 1,000 Danish kroner ($ 163). With stocks trading around DKK 890, this means the stock could have the legs to climb 12% higher in the near term.
UBS joins RBC Capital Markets in smiling at the action after the company’s capital markets day on June 2. The Canadian bank raised Ørsted to outperform on June 8 with a target price of DKK 1,050.
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The Swiss bank said the capital markets day was a positive and “fundamentally bullish” event, with management presenting ambitious 2030 targets for installed renewable capacity, two-thirds higher than previously.
“Above all, this management has great confidence in its ability to win projects in the future,” UBS analysts said. “But it’s also worth thinking about the growing mismatch between climate goals and reality, which means – in our opinion – that we can start looking beyond individual auction events and broadly assume that the Ørsted development pipeline will be built. “
Analysts also said it was possible that the macroeconomic factors that have hurt stocks in recent months may ease, particularly in the run-up to the COP26 climate conference in November. UBS expects renewed interest in clean energy stocks like Ørsted ahead of COP26 – and Ørsted is already underperforming both the utilities sector and its green energy peers this year. trimester.
“At current levels, Ørsted offers a good opportunity to buy out the clean energy thematic in the long term, via a high quality company which now supports its strong outlook with detailed guidance,” UBS analysts said.
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Currently, Ørsted is one of the world’s largest developers of offshore wind energy, with a commitment to be carbon neutral by 2025 and a green energy partnership with oil major BP BP,
But its roots are as a state-owned oil company, founded in 1972 to manage Denmark’s offshore oil and gas assets. In 2017, Ørsted sold its oil and gas business to chemical company Ineos for more than $ 1 billion as part of a massive shift to renewables.
Ørsted warned that profit is expected to fall this year to between 11% and 16%, largely due to the drop in wind speeds, and the pressure on equities increased in April with a warning of surprise costs that have significantly affected quarterly profit.
Submarine rocks threaten to cause the failure of critical cables in 10 of the group’s offshore wind farms. The company’s initial assessment of the total financial cost of the issue is around DKK 3 billion from 2021 to 2023, with the bulk of cash outflows in 2022 and 2023 – but the bigger picture doesn’t is not clear.