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Orsted shares have maintained their slide today, dropping through a key 52 week low as analysts continue to back the alternative energy stock. Bernstein analyst Deepa Venkateswaran has maintained a buy rating on Orsted broke through a previous low on the 52 week time horizon. Shares in the company are now down over 20% in that time frame.

Stock was trading at DKK 829 at time of writing having rallied slightly off that low at around the 818 mark.

Orsted is a Danish multi-national power company and is the world’s largest developer of offshore wind power. It accounts for 29% of the global installed wind power capacity. Nearly 90% of the energy it produces comes from renewable energy sources.

In its latest earnings report, at the end of June, Orsted reported quarterly revenues of $11.72bn with net profits of $758m. Bernstein is not alone in its enthusiasm for the stock, however. Berenberg’s Andrew Fisher also has a buy rating in place for the shares. UBS rates the company a hold.

Orsted is buying into UK renewable energy

Although listed in Denmark, Orsted is a big investor in the UK’s renewable energy infrastructure. It recently said it was planning to invest £12bn directly into Scottish companies, assisting with the construction and develop of offshore wind farms in the British Isles over the next decade. It has submitted binds for five projects, including two floating wind-only bids submitted in conjunction with BlueFloat Energy and Falck Renewables.

There are also plans afoot to develop renewable hydrogen projects in Scotland which would potentially draw on the power being generated from the offshore wind projects. The company wants to incorporate large scale offshore wind generation alongside renewable hydrogen and green fuels to decarbonise hard to abate sectors in heavy industry and transport.

Shares in Orsted are now well off their 52 week high. While revenues are projected to increase at the company going into 2022, profits are looking like they will continue to shrink. It has a  forecast 12 month rolling PE ratio of 40.8, but 12 month EPS growth is down, and the price to book ratio is 3.81.

Institutions are still backing Orsted

According to data from Stockopedia, institutions still like the company and seem to be positioned to ride out any lows, but the real question is how low does it go before even the faithful start selling out?

Financials still look relatively robust, although we are interested to note the company announcing today that it has signed a €2 billion sustainability-linked revolving credit facility. This has two one year extension options.

Orsted has a Z2 score (Altman bankruptcy risk) of 5.2, which is keeping it out of the red zone, but the size of its illiquid assets portfolio is necessarily huge.

The stock still looks like a good longer term bet on the European and indeed global green energy infrastructure story. It does some to be losing some share price momentum at the moment, which could set up some opportunities for new investors to get in at a more tolerable price point than has been possible since before the pandemic began, Anything in the DKK 650-700 range looks like a decent buying opportunity. Below DKK 600 and something is rotten in Denmark.

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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