Jefferies downgrades BP to 'hold', slashes price target
Jefferies downgraded on Monday to 'hold' from 'buy' and slashed the price target to 390p from 550p.
"As we lower our oil price outlook for 25/'26, we see BP's strategy facing increasing execution risk: the company may soon have to face the hard choice between delivering on the leverage reduction target or suspending the buyback and/or, reducing its upstream growth ambitions," the bank said.
Jefferies said its large-cap order of preference is Shell, then TotalEnergies, then BP.
The bank pointed out that BP has the highest leverage in the sector. In February, BP presented a "credible" plan to reduce net debt by $5-9bn and hybrid debts by around $4bn by 2027, Jefferies said.
"However, in the current macro conditions, we see this plan as increasingly at risk: at $65/bbl oil prices, bp will generate circa $8bn lower CFFO compared to its '25-27 plan.
"This leaves de-gearing almost entirely driven by the execution of the $20bn divestment plan, which we see as facing greater risks due to global economic uncertainty."
It noted that year to date, BP has underperformed its European peers by around 5%.
"However, NTM (next twelve months) earnings estimates have fallen by 9pcp more than for the sector (12%), resulting in a relative price-to-earnings re-rating: currently at 14x versus the sector at 11x (FY25)."
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.