Barclays Downgrades Siemens Energy as Valuation Seen Near Peak

Siemens Energy AG (ETR: ENR1n) shares dropped more than 5% on Tuesday after Barclays downgraded the German power equipment manufacturer to "underweight" from "equal weight," citing concerns that the company's €145 billion valuation already reflects peak market conditions despite strong long-term earnings prospects.

Barclays raised its price target to €130 from €110, but argued that Siemens Energy's current valuation assumes sustained peak-cycle performance that may be difficult to maintain. The brokerage expects adjusted earnings per share to grow at a compound annual rate of 25% through 2030, with EPS increasing from €4.26 in fiscal 2026 to €9.20 by fiscal 2028. Revenue is also projected to climb from €43.24 billion to €57.41 billion over the same period, representing a 13.7% compound annual growth rate.

Despite these forecasts, Barclays believes several favorable factors—including strong gas turbine demand, tight supply conditions, and robust free cash flow—are likely to peak around 2026, limiting further upside for the stock.

The broker noted that Siemens Energy received gas turbine orders equivalent to 50 gigawatts annually over the past six months, exceeding total global demand recorded in any year between 2017 and 2023. However, Barclays estimates sustainable medium-term demand at 80 to 90 gigawatts annually, roughly 15% below current ordering levels. It also expects the company's market share, currently around 40%, to gradually normalize toward its historical range of 25% to 27%.

Barclays added that major turbine manufacturers have already secured more than 70 gigawatts of data center-related orders or production slots over the past 15 to 18 months, effectively covering the next three to four years of expected demand. As a result, future order growth could slow significantly.

The brokerage also forecasts Siemens Energy's equity free cash flow to peak at approximately €7.62 billion in fiscal 2026, with nearly two-thirds driven by working capital benefits that are expected to reverse from 2028, creating a headwind.

Additionally, Barclays highlighted Siemens Energy's planned increase of its stake in Siemens Energy India to 51% by 2028, a transaction carrying an estimated $5 billion mark-to-market obligation, which could limit shareholder returns.

While Siemens Energy continues to trade at a 20% to 35% discount to GE Vernova on adjusted forward valuation metrics, Barclays believes that discount is narrower than it appears and no longer justifies a more positive rating.