US President Donald Trump’s “drill baby drill” agenda to strengthen the fossil fuel industry has helped shift the tide against the renewable sector.

Yet, Tancrede Fulop, senior equity analyst at Morningstar, notes that Trump is a factor but not the source driving down share prices of renewable energy stocks.

He argues that renewables have been pulled down due to their sensitivity to interest rates as inflation rose globally after the pandemic.

Despite the renewable energy downturn, there are still opportunities for investors in the sector.

Is Orsted Cheap Enough to Buy?

In Fulop’s view, Danish wind giant Orsted ORSTED is a deeply undervalued stock at 5-stars. Year to date, Orsted’s share price has dropped 1.93% and is trading at DKK 329.50.

The world’s largest offshore wind developer announced last month it will slash planned investments by 25% as it fights to boost its share price.

Orsted has ditched expensive projects that were no longer profitable. The company has struggled to build a new supply chain in the US, which is a target market for the offshore wind leader, Fulop points out.

“Trump signed an executive order banning any new federal approval for offshore wind farms. But the two Orsted received federal approval for are already under construction. They are not at risk.” Despite the uncertainties for Orsted’s US business, Fulop believes the downside potential “is excessively priced in” to the stock’s share price.

Benjamin Bielawski, portfolio manager of the Virtus GF Clean Energy Fund, holds Orsted at 1.76%.

He argues that despite the company’s US woes, its position in Europe remains strong with 12 offshore wind farms in the UK and recent onshore wind investments in Germany.

Nonetheless, he feels Orsted is facing the challenge of reconvincing investors that offshore wind is a legitimate proposition.

“The evidence has shown offshore wind is attractive. It has higher utilization rates than onshore wind. You do not have to worry about using up land. But offshore wind is costly and needs a low-interest rate environment and for inflationary pressures to come down,” he says.

Is Vestas a Better Wind Stock to Invest In?

Vestas VWS, the Danish manufacturer of wind turbines, is also considered undervalued by Morningstar with a 4-star rating.

“Shares appear cheap, trading at a 40% discount to our fair value estimate, driven by uncertainty surrounding the outlook for wind energy under President Donald Trump’s administration. Our forecasts anticipate Vestas will be able to deliver fiscal 2025 revenue between its EUR 18 billion and EUR 20 billion full-year guidance,” Matthew Donen, senior equity analyst at Morningstar writes.

In February, Vestas’ operating profit reached EUR 759 million which surpassed the company’s own estimates of EUR 672 million.

The company has benefited from higher selling prices of its wind turbines which has reduced the impact of inflation pressures coming from the commodities it needs to produce them.

Mike Appleby, investment manager on the Liontrust Sustainable Investment team, holds Vestas across his portfolio ranges from the Liontrust SF European Growth fund, to the Liontrust SF Cautious Managed fund, which are Bronze-rated.

“Vestas looks interesting but only for a patient investor because the market is focused on quarterly earnings, and it is overlooking any meaningful future profitable structural growth. We like Vestas because they are going to continue to make world class wind turbines that will be installed all over the globe,” he says.

Appleby also backs the stock for its exposure to less capital intensive and easier-to-build onshore wind projects. Year to date Vestas is trading at DKK 110.60 and is up 5.64%

Why are EDPR Shares so Cheap?

5-star-rated EDP Renovaveis EDPR is also undervalued, according to Fulop, as it has been severely hit by the shift in sentiment around renewables.

“EDPR is a pure renewables play so it has massively underperformed in recent results. The company has trimmed its capacity and ambitions, and its big exposure to the US mostly comprises on shore wind.”

Yet, Fulop does not attribute the poor performance to Trump policies.

The tax credits the company has received from the Inflation Reduction Act cannot be repealed, while many of its onshore wind and solar projects are being constructed in Republican-held states.

In February EDPR posted a full-year net loss of EUR 556 million from the closure of its wind projects in Colombia.

The company’s bottom line also halved to EUR 210 million. Year to date the stock is trading at EUR 8.29 and is down 17.43%.

Yet, Jennifer Boscardin Ching, senior client portfolio manager, Pictet Clean Energy Transition fund, believes that utilities and the wider renewable energy sector will make a comeback, as the world’s demand for electricity increases.

“A very strong driver going forward is going to be power demand coming from AI and data centers. The current situation on the ground is that we have demand outstripping supply.”

“Even in the US, what are the most readily available forms of energy, the fastest to be deployed, and what is the cheapest? It is utilities, it is solar and wind power. From a cost of energy basis, renewables are the most competitive.”

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.