On Wednesday, BofA Securities adjusted its stance on Orsted A/S (CSE:ORSTED:DC) (OTC: DNNGY (OTC:DNNGY)), downgrading the company’s stock rating from Buy to Neutral, while also reducing the price target from DKK410.00 to DKK350.00. The revision by BofA Securities comes as Orsted shifts its focus towards the completion of ongoing projects and improving its capital structure to sustain a robust investment grade credit rating. InvestingPro data shows the company’s challenging position, with a market capitalization of $17.52 billion and a concerning trend of quickly burning through cash, though its current ratio of 1.48 indicates sufficient liquidity to meet short-term obligations.
According to BofA Securities, the strategic refocus is likely to result in lower earnings, growth, and dividends for Orsted. The firm anticipates it will take approximately three years for Orsted to transition from its current execution phase back to a growth trajectory. The analyst remarked that the decision to downgrade the stock rating was influenced by a combination of factors, including Orsted’s recent stock rally and a reassessment of the company’s valuation. This comes as InvestingPro data reveals the company has not been profitable over the last twelve months, with revenue of $9.87 billion and EBITDA of $4.45 billion. For deeper insights into Orsted’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
The assessment by BofA Securities suggests that the possibility of an equity raise by Orsted is no longer expected, which could have provided additional capital but may have also diluted existing shareholders. The firm’s analysis indicates that the risk/reward profile for Orsted is now more evenly balanced, prompting the downgrade to a Neutral rating. This assessment aligns with the company’s significant stock decline, as InvestingPro data shows a -31.85% return over the past six months.
BofA Securities also adjusted the American Depositary Receipt (ADR) price target, reducing it from $19.09 to $16.18. This change reflects the new price target in DKK and the corresponding valuation in U.S. dollars for investors trading Orsted’s shares on the OTC market.
Orsted is currently in a phase where it is prioritizing the execution of its projects under construction and the repair of its capital structure, as highlighted by BofA Securities. The company’s strategic shift is a significant move aimed at maintaining its solid investment grade credit rating, which is critical for its financial health and ability to secure financing for future projects.
In other recent news, Orsted A/S has been the subject of several analyst adjustments. Citi has reduced Orsted’s stock price target from DKK428 to DKK300, following concerns about the company’s financial health and potential impact of strategic decisions on its balance sheet. Analyst Jenny Ping suggests Orsted may face a difficult decision between selling more assets or raising equity to address financial woes.
On the other hand, Morgan Stanley (NYSE:MS) downgraded Orsted’s stock from Overweight to Equalweight and lowered the price target to DKK480 from DKK500. Despite recent positive developments such as favorable outcomes in the UK’s AR6 auction for renewable energy, the firm anticipates market reluctance to re-evaluate Orsted’s stock based on the value of secured projects or long-term growth prospects.
Lastly, Goldman Sachs (NYSE:GS) downgraded Orsted’s stock from Buy to Neutral and adjusted the price target to DKK445 from DKK520. The firm cited potential challenges Orsted could face with its asset rotation plan and medium-term risks that could negatively affect the company’s earnings per share. These recent developments highlight the shifting perspectives of analysts on Orsted’s financial and operational outlook.
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