Morgan Stanley’s renewable energy outlook drives Orsted stock upgrade as U.S. offshore wind projects show reduced risk
Key Takeaways
- Morgan Stanley upgrades Orsted to Overweight from Equal-weight, raising price target to DKr 360 from DKr 340, suggesting 20% upside potential
- Orsted shares surge 8% in Copenhagen trading following the upgrade, driven by reduced risks in U.S. offshore wind projects and improved risk-reward profile
- Q1 2025 EBITDA jumps 18% to DKK 8.9 billion with net profit up 87% to DKK 4.9 billion, despite negative free cash flow of DKK 10.2 billion from investment outlays
Introduction
Danish offshore wind giant Orsted receives a significant vote of confidence from Morgan Stanley, which upgrades the renewable energy leader to Overweight amid improving sector dynamics. The investment bank cites diminishing risks in U.S. offshore wind projects and an increasingly attractive valuation for the company that has surpassed 10 GW of offshore wind capacity.
The upgrade reflects a broader shift in investor sentiment toward renewable energy stocks, particularly those with strong operational fundamentals and strategic positioning in key growth markets. Orsted’s enhanced risk profile stems from progress on legacy projects and clearer regulatory frameworks in critical jurisdictions.
Key Developments
Morgan Stanley raises its price target to DKr 360 from DKr 340, indicating potential 20% gains from current trading levels. Analyst Robert Pulleyn notes an “inflection in the Renewables cycle as investors search for laggards within outperforming European Utilities.”
The brokerage highlights reduced probability of cancellation for Orsted’s key U.S. projects, Revolution and Sunrise. Revolution Wind stands 75% complete while Sunrise Wind reaches 35% completion, both benefiting from Inflation Reduction Act tax credit support.
Positive sector momentum gains support from Equinor’s Empire Wind project resumption and clearer U.S. tax credit guidance. These developments address previous investor concerns about regulatory uncertainty and project viability in the American offshore wind market.
Market Impact
Orsted shares jump over 8% in Copenhagen trading following the upgrade announcement, with Bloomberg reporting gains of approximately 6% in early Tuesday sessions. The stock response demonstrates renewed investor appetite for renewable energy exposure after a period of underperformance.
The company trades as the “cheapest Renewable Energy Sources-exposed stock” based on 2026 EV/EBITDA metrics, according to Investing.com. Morgan Stanley identifies additional DKK 75 per share value in projects like Changhua and Hornsea 3 that remains unrecognized by the market.
Out of 31 analysts covering the stock, 22 maintain “hold” ratings, five issue “strong buy” or “buy” recommendations, and four assign “sell” or “strong sell” ratings. This distribution suggests cautious optimism among the analyst community.
Strategic Insights
Orsted’s strategic position strengthens through asset disposal progress, completing DKK 27 billion of its DKK 70-80 billion target to address leverage concerns. The company maintains investment guidance and EBITDA outlook, signaling confidence in long-term sector fundamentals.
Lower interest rate expectations and easing supply chain pressures create favorable operating conditions for capital-intensive renewable projects. Morgan Stanley’s bull scenario, which fully values U.S. projects, estimates a DKr 500 price target, indicating substantial upside potential if execution succeeds.
The German offshore wind farm Gode Wind 3 contributes to recent earnings growth, while bioenergy and gas markets provide diversification beyond core wind operations. This portfolio balance reduces dependence on single-market exposure.
Expert Opinions and Data
Morgan Stanley describes Orsted as “worth a fresh look” due to improved risk-reward dynamics and reduced U.S. project risks. The firm sees attractive upside over the next 12-18 months as the company de-risks its existing portfolio.
Quarterly financial performance demonstrates operational strength with Q1 2025 EBITDA reaching DKK 8.9 billion, an 18% year-over-year increase. Net profit climbs 87% to DKK 4.9 billion, though free cash flow remains negative at DKK 10.2 billion reflecting significant investment outlays.
Offshore wind earnings generate DKK 7.7 billion in Q1, up 10% year-over-year, while gross investments total DKK 13.8 billion, an 81% increase from the prior year. The company maintains guidance for DKK 50-54 billion in gross investments for 2025.
Conclusion
Orsted emerges from a challenging period with improved fundamentals and clearer project visibility, particularly in the critical U.S. market. The Morgan Stanley upgrade reflects broader sector recovery as supply chain pressures ease and regulatory frameworks stabilize.
The company’s strong operational performance, combined with strategic asset disposals and project progress, positions it to benefit from rising global electricity demand and supportive policy environments. Second-quarter results due August 13 represent a key milestone for sustained recovery momentum.
