Morgan Stanley Removes Siemens Energy from Focus List Amid Regional Concerns

Analysts cite geopolitical risks to key gas services orders, but maintain long-term 'Overweight' rating. Shares fell 4.9% on the news.

Analysts at Morgan Stanley have taken Siemens Energy off their list of top investment ideas, citing heightened geopolitical risks in a key market. The decision stems from the energy technology firm's significant exposure to the Middle East through its profitable gas services division.

Geopolitical Tensions Pose a Threat to Orders

A research team led by analyst Max Yates identified the company as having above-average vulnerability to regional disruptions compared to its industry peers. The primary concern centers on Gas Services, a lucrative segment for Siemens Energy. Last year, a substantial 35% of orders for gas turbine capacity originated from Middle Eastern countries. The firm's total regional business involvement amounts to approximately €9 billion.

Market observers now consider it a tangible risk that national budgets in the region could be reallocated toward military spending, potentially at the expense of future turbine orders. Furthermore, restricted access to customer sites could delay crucial service operations. In response to this revised assessment, Siemens Energy's share price declined by 4.92% on Friday, closing at €143.00.

Long-Term Outlook Remains Positive

Despite this near-term caution, Morgan Stanley maintains its "Overweight" rating on the stock with a price target of €166. This recent pullback occurs within the context of a remarkably strong performance period; the shares still show a gain of over 146% when viewed across a twelve-month horizon. Notably, the stock joined the Stoxx Europe 50 index on March 23 due to its increased market capitalization, a move that generates structural buying pressure from passively managed funds.

Fundamentally, the business is supported by a record order intake of €17.6 billion in the first quarter. This surge was largely driven by AI-related demand for grid infrastructure from data centers, while losses at the wind power subsidiary Siemens Gamesa simultaneously narrowed.

Looking ahead to 2030, Morgan Stanley forecasts robust annual EBITA growth of 26%, underpinned by a substantial order backlog. However, the bank's profit estimate for 2028 now sits only marginally above general market expectations. Consequently, the scope for rapid, positive earnings surprises appears more limited for the time being, a factor that technically reinforces the current consolidation below the 50-day moving average.