S&P 500 slips, but losses kept in check as Nvidia climbs ahead of results
On Tuesday, Barclays (LON:BARC) analyst Mick Pickup upgraded shares of Subsea 7 SA (SUBC:NO) (OTC: OTC:SUBCY) from Equalweight to Overweight, while maintaining a price target of NOK270.00. The upgrade follows a strong quarter for the company, with Subsea 7 outperforming its own consensus EBITDA estimates by 10%. The firm also met its guidance for 2025, projecting an expansion of EBITDA margins from the current 15.9% to a range of 18-20%.
The analyst noted that, similar to Saipem (BIT:SPMI), Subsea 7 is experiencing an increase in depreciation as new chartered capacity is accounted for as leases. Although this impacts the growth narrative to some extent, the analyst emphasized Subsea 7’s attractive position due to limited capacity in the market and the ongoing merger process with Saipem. The proposed merger is expected to crystallize, further bolstering Subsea 7’s outlook.
Despite the rise in leases, Barclays’ analysis indicates that Subsea 7’s stock still offers a double-digit free cash flow yield. The company is also poised to distribute over $1.1 billion before the merger’s anticipated completion in the second half of 2026. This distribution would equate to a return of more than 20%.
The price target of NOK270 per share is based on a stand-alone discounted cash flow analysis, which now includes a new discrete forecast for 2027. This target is consistent with the implied merger price of NOK281 per share before accounting for the time required to close the deal. With Subsea 7’s stock price linked to Saipem’s, and Barclays holding an Overweight rating on Saipem as well, the potential upside for Subsea 7 is seen at approximately 50%. This potential, coupled with the positive outlook, has led to the upgrade to Overweight.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.