Last Update 06 Jan 26

Fair value Increased 3.71%

VWS: Future Execution Risks May Undermine Raised Outlook And Earnings Guidance

Analysts lifted their price target on Vestas Wind Systems to DKK 173 from DKK 164, citing updated assumptions on fair value, discount rate, revenue growth, profit margin and future P/E that support a slightly higher long term outlook for the shares.

Analyst Commentary

Bullish Takeaways

Bullish analysts frame the new DKK 173 target as reflecting updated views on fair value that they see as better aligned with the company’s longer term earnings potential.
The adjustment incorporates revised assumptions on revenue growth and profit margins, which these analysts view as supportive of a higher multiple than previously applied.
By lifting the target, bullish analysts signal confidence that execution on existing plans can justify a richer P/E than was embedded in the prior DKK 164 level.
The maintained positive stance from a major house such as JPMorgan gives some investors additional comfort around the risk and reward trade off at current valuation levels.

Bearish Takeaways

More cautious analysts may point out that, even with the higher DKK 173 target, the change is incremental and suggests only a slightly improved long term view rather than a major re rating story.
The reliance on updated assumptions for revenue growth and margins means the valuation case is sensitive to any execution shortfalls or shifts in expected profitability.
Some investors could see the emphasis on future P/E as a reminder that a meaningful portion of the thesis rests on delivering on forward earnings rather than current results.
The gap between the previous DKK 164 target and DKK 173 might also be read as a signal that, while upside exists, analysts are still factoring in a balanced risk profile rather than an aggressive growth outlook.

What's in the News

Vestas reported multiple new orders in the USA and Canada, including 574 MW and 347 MW of capacity for undisclosed projects, alongside a separate 320 MW order. This highlights continued activity in North American onshore wind (Client Announcements).
The company secured its first offshore wind order in South Korea with a 390 MW contract for the Shinan-Ui project, including 26 V236-15.0 MW turbines and a 20-year service agreement. Operations are targeted to begin in 2028 (Client Announcements).
In Brazil, Vestas and Casa dos Ventos agreed on an 828 MW order for the Dom Inocencio wind complex, supported by a 25-year AOM 5000 service agreement and over BRL 5b of total project investment (Strategic Alliances).
Across Europe, Vestas announced a series of new onshore orders, including multi project commitments in Germany, Italy, Spain, Portugal, Ireland, Finland and Poland. These are generally paired with long term AOM 4000 or AOM 5000 service agreements and deliveries stretching into 2027 (Client Announcements).
Vestas updated its 2025 earnings guidance, with revenue now expected between €18.5b and €19.5b. This narrows the previous €18b to €20b range (Corporate Guidance).

Valuation Changes

Fair Value: risen slightly from DKK 156.26 to DKK 162.05, aligning with the higher DKK 173 price target.
Discount Rate: essentially unchanged, moving marginally from 7.43% to 7.43%.
Revenue Growth: edged higher from 7.80% to 7.99%, implying a modestly stronger top line profile in the model.
Net Profit Margin: trimmed from 5.88% to 5.79%, reflecting slightly more conservative profitability assumptions.
Future P/E: risen from 18.33x to 19.20x, indicating a modestly higher valuation multiple applied to expected earnings.

Policy support in key markets and global grid reforms are driving higher demand, expanding Vestas' growth opportunities and top-line potential.
Offshore manufacturing expansion and improved service operations are expected to boost margins, profitability, and market share as operational efficiencies increase.
Revenue growth and profit margins are under pressure from policy uncertainty, rising costs, fierce price competition, and persistent trade and currency headwinds.

Catalysts

About Vestas Wind Systems

Engages in the design, manufacture, installation, and services of wind turbines the United States, Denmark, and internationally.What are the underlying business or industry changes driving this perspective?

The resolution of U.S. policy uncertainty and renewed government support for wind is driving a significant rebound in order intake, especially in onshore. This sets the stage for robust multi-year demand in the U.S.-a key market-likely boosting revenue growth into the second half of the decade.
Global prioritization of energy security and sustainability, with many governments accelerating grid investments and permitting reforms (e.g., Germany, UK, EU-wide alignment), is expanding Vestas' addressable market and could materially increase order volume and top-line growth.
Vestas' ramp-up and serial manufacturing of next-generation offshore turbines in Poland and project execution for large offshore contracts lay the foundation to capture premium market share and benefit from accelerating offshore wind adoption, expected to support both future revenue and margin improvement as ramp-up costs decline.
The ongoing Service recovery plan-focused on contract repricing, trimming unattractive agreements, and cost control-is anticipated to gradually enhance the high-margin service business, smoothing earnings volatility and improving overall profitability and net margins by 2026 and beyond.
Stabilizing raw material and logistics costs, combined with improved onshore execution and reduced warranty expenses, are already contributing to better gross margins and EBIT. These operational efficiencies are expected to be further leveraged as scale increases, supporting future earnings growth.

Vestas Wind Systems Earnings and Revenue Growth

Vestas Wind Systems Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Vestas Wind Systems's revenue will grow by 7.6% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.1% today to 5.8% in 3 years time.
Analysts expect earnings to reach €1.3 billion (and earnings per share of €1.36) by about September 2028, up from €762.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €1.9 billion in earnings, and the most bearish expecting €752.2 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.2x on those 2028 earnings, down from 21.5x today. This future PE is lower than the current PE for the GB Electrical industry at 21.0x.
Analysts expect the number of shares outstanding to grow by 5.71% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.14%, as per the Simply Wall St company report.

Vestas Wind Systems Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Order intake in Q2 declined 44% year-on-year, mainly due to policy uncertainty in the US and the lack of offshore orders, indicating that Vestas's revenue growth is highly sensitive to volatile policy environments and regulatory delays.
Offshore business is currently generating steep ramp-up costs and segment losses, with management acknowledging that ramp-up costs are higher than anticipated and expected to create a substantial drag on EBIT until at least late 2025, directly pressuring margins and net earnings.
Average Selling Price (ASP) per megawatt dropped from €1.24 million to €1.11 million quarter-on-quarter due to mix and competition, reflecting ongoing pricing pressure which, if continued, could erode future gross margins and profitability.
Persistent global trade tensions, tariffs-particularly recent US tariff uncertainty-and currency headwinds are increasing costs and impacting order book value, putting pressure on both revenue and net profitability.
Intensifying price competition in Europe from Chinese wind turbine manufacturers is highlighted as a risk, which could result in further margin compression and threaten Vestas's ability to sustain profitable growth, particularly as governments and developers become price-sensitive.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of DKK139.905 for Vestas Wind Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK195.99, and the most bearish reporting a price target of just DKK60.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €23.1 billion, earnings will come to €1.3 billion, and it would be trading on a PE ratio of 20.2x, assuming you use a discount rate of 7.1%.
Given the current share price of DKK122.7, the analyst price target of DKK139.91 is 12.3% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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