Vestas Wind Systems A/S (VWS) fell the most in six weeks in Copenhagen trading after Sanford C. Bernstein & Co. cut its recommendation and price target saying the world’s largest wind turbine maker is running out of cash.
Vestas fell as much as 9.7 percent, the most since Aug. 1. The stock lost 8.8 percent to 39.94 kroner at 9:49 a.m. in the Danish capital, making it today’s biggest decliner in the OMX Copenhagen 20 index (KFX) and in the Stoxx Europe 600 Index.
Vestas, hurt by increased competition and lower government subsidies for green energy, said July 31 its banks have allowed it to draw on credit lines as its cash flow deteriorated. The company has since accelerated job cuts. Vestas on Aug. 27 said it was in “strategic” talks with Mitsubishi Heavy Industries Ltd. without elaborating on the nature of a possible partnership.
A tie-up with Mitsubishi Heavy is “unlikely to provide sufficient cash to Vestas,” Martin Prozesky, a London-based analyst at Sanford Bernstein, said in a note today. “The market outlook remains negative. The steps that management has taken are not enough to sustainably turn around performance.”
Prozesky cut his recommendation on the share to underperform from market-perform and lowered his share price estimate by 23 percent to 20 kroner, which is the lowest of the 26 Vestas analysts tracked by Bloomberg.
Before today, the shares of the Aarhus, Denmark-based company had jumped 29 percent since the announcement on the Mitsubishi Heavy talks.
“Vestas’ stock has experienced wild swings over the past weeks as worries about the balance sheet and press reports about a potential strategic investor grabbed the headlines,” Prozesky said. “Our view has been that the stock is largely ‘un- investable’ given these two potential extreme outcomes.”
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