UBS downgrades Siemens Power; “priced for perfection”

Investing.com – Siemens (ETR:SIEGn) Power (ETR:ENR1n) inventory noticed sturdy good points in 2024, however UBS has now downgraded its stance on the German vitality firm, saying it’s “priced for perfection.”

At 07:00 ET (12:00 GMT), Siemens Power inventory fell 3.6% to €50.04 Monday, however has gained over 300% over the past yr, pushed by sturdy efficiency of Fuel Companies and Grid Applied sciences divisions, and progress on a turnaround of Siemens Gamesa.

“We imagine these elements are greater than priced in with a number of potential dangers remaining for the margin turnaround within the Siemens Gamesa enterprise,” analysts at UBS stated, in a word dated Jan. 20.

Because of this, the Swiss financial institution has downgraded its stance on the corporate to ‘promote’ from ‘impartial’, with a worth goal of €38/share, raised from €23. 

“We imagine the shares are pricing in flawless execution, and Siemens Power attaining the higher finish of its FY28 targets.”

“Primarily based on our reverse sum of the components valuation, we estimate the shares are pricing in a >€13bn EV for Siemens Gamesa, which we imagine may very well be bold given the potential dangers,” UBS stated. 

The Swiss financial institution sees a number of potential dangers remaining within the Siemens Gamesa enterprise.

“Whereas we do imagine that the corporate might flip across the profitability of the Siemens Gamesa enterprise (already constructed into consensus expectations), we see potential dangers within the wind turbine enterprise which the market could also be overlooking,” UBS stated.

It cites market share erosion in onshore, slower progress/ decline in service enterprise (as a result of decrease onshore progress), incremental misplaced manufacturing issue liabilities to prospects, and additional delays/price overruns in offshore. 

“We word that the enterprise has been indicated to be two years away from simply break-even (anticipated in FY26e), with margins doubtlessly reaching low/mid-single-digit optimistic ranges (3-5%) solely in FY28e,” UBS stated.

“Moreover, we additionally word potential macro/geopolitical dangers, which we imagine might not be priced in, particularly within the US (uncertainty of offshore wind market + tariff dangers), with the US forming c.20% of the corporate’s backlog.”