(Bloomberg) -- A bad week for wind stocks has pushed an index tracking the broader European renewable energy complex to its lowest level in three years.

On Tuesday, jitters over the risk of impairments saw shares in Denmark’s Orsted A/S slide 8.3%, with losses extending into Wednesday as the company said it’s ready to walk away from US projects. A downbeat initiation from Barclays Plc on Vestas Wind Systems A/S further soured the mood.

Barclays analysts said in a note on Wednesday that the market has an “idealistic” perception of Vestas, which “misses a difficult and challenged business.” The stock fell as much as 6.5% in Copenhagen as the broker began coverage with an underweight rating and a Street-low price target implying 37% downside from the last close.

While green energy stocks soared during the pandemic, they have struggled in the aftermath as the appeal of the growth sector has been dented by worries over the impact of higher interest rates. Wind-turbine makers have also been plagued by quality issues and soaring raw-materials costs, triggering a profit warning from Siemens Energy AG, which withdrew its guidance in June.

The European Renewable Energy Index has dropped 28% this year, hitting its lowest level since July 2020, even as the European Union has set out plans to boost the region’s green energy industry and as President Joe Biden’s Inflation Reduction Act looks to bolster sustainable technologies.

Valuations have also come pressure. A Goldman Sachs Group Inc. renewables basket that includes Vestas, Orsted, Germany’s Nordex SE, Portugal’s EDP SA, Siemens Energy and Italy’s Enel SpA is trading at a 20% discount to the MSCI Europe Growth Index based on forward earnings.

Read More: Hedge Funds Are Shorting Stocks Biden’s IRA Is Meant to Help

Where wind stocks in particular are concerned, investors are still wary.

“These are capital intensive business models, that are facing increasing levels of competition from both low-cost overseas vendors, as well as competing technologies such as solar,” said Thomas Fitzgerald, a fund manager at EdenTree Investment Management. “These dynamics, in our view, make it difficult to forecast the profitability pathway for these businesses going forward,” he said in written comments.


--With assistance from Michael Msika.

©2023 Bloomberg L.P.