Bank of America has upgraded wind energy giant Ørsted from “neutral” to “buy” citing an improved risk-reward profile for the battered stock. The Denmark-headquartered energy firm’s stock, which also trades in the U.S., fell by more than 65% from its peak in 2023 as the company faced a series of negative headlines regarding project delays, cost overruns and write-downs in the critical U.S. market . However, Bank of America analysts expect Orsted’s fortunes to improve in 2024 and have raised their price target from $15.06 per share to $22.80, representing nearly 20% upside from current levels. The upgrade and price target boost come after the stock has already staged a more-than-50% recovery from its November lows. DNNGY 1Y line “We believe that a clearer risk-reward skew has emerged,” BofA analysts led by Peter Bisztyga said in a note to clients on Jan. 12, touting Ørsted’s potential to repair its balance sheet through asset sales, capex reductions, and a potential 25% dividend cut. Such measures, the analysts wrote, would enable Ørsted to meet its investment grade BBB+ target credit rating without a dilutive equity raise, which would likely further pressure the stock. In addition, the Wall Street bank’s analysts see execution risk as “low” given Ørsted recently green lit its massive £8 billion Hornsea 3 project in Britain . Its remaining U.S. exposure consists primarily of the Sunrise Wind project off Long Island, which still needs state contract approval, according to the bank. Even if Sunrise Wind falls through, the analysts believe the downside to Ørsted shares would be manageable. “We believe that investors should again be willing to pay some value for a moderate growth pipeline, given recent improvements in industry backdrop for offshore wind and assuming that Orsted stabilises its balance sheet,” the analyst added.
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