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On Friday, Berenberg analysts downgraded Neste Oyj shares, listed on the Helsinki Stock Exchange (NESTE:FH) and over-the-counter (OTC: NTOIY), from "Buy" to "Hold." The firm also significantly reduced the price target for Neste from €19.00 to €10.00. The downgrade followed Neste’s capital markets day on February 13, where the company unveiled a new strategy to navigate a challenging operational landscape. The stock, currently trading at $4.85, has declined over 63% in the past year, though InvestingPro analysis suggests the shares are currently undervalued.
According to Berenberg, Neste aims to improve its EBITDA run-rate by €350 million by the end of 2026, with €250 million anticipated to come from cost reductions. The strategy also targets an operating cash flow of €1.5 billion to €1.7 billion by 2027-28, a substantial increase from the €0.7 billion forecasted before adjustments in working capital for 2024. Current EBITDA stands at $725 million, with the company maintaining a solid current ratio of 1.73, indicating healthy liquidity.
The analysts at Berenberg expressed concerns about the ongoing pressure on margins due to the worsening industry overcapacity. They believe that while there is significant upside potential for Neste in the long term if margins recover, their estimates for the company’s financial performance in 2025 and 2026 are considerably below the consensus.
Furthermore, Berenberg highlighted uncertainties surrounding the Clean Fuel Production Credit (CFPC) in the United States, which could pose an additional challenge to Neste’s earnings. The firm’s revised outlook and price target reflect these factors, signaling a more cautious stance on the stock’s near-term prospects.
In other recent news, TD Cowen’s analysts have adjusted their outlook on Neste Oyj, reducing the stock’s price target from €19.00 to €15.00 while maintaining a Hold rating. This revision is made in anticipation of Neste’s upcoming update on its full-year 2025 projections, which will be presented with its fourth-quarter results in February. Analyst Jason Gabelman from TD Cowen predicts that Neste will report a flat year-over-year Renewable Product sales margin for 2025, with Sustainable Aviation Fuel (SAF) production expected to reach only 50% of its capacity. The analyst notes that an oversupply of SAF could impact the ability of international companies, including Neste, to fully utilize their SAF capacities. Gabelman also forecasts that Neste’s total sales volumes will slightly exceed consensus expectations, though the sales margin is expected to remain flat at approximately $420 per ton, below the consensus estimate of $455 per ton. The analyst projects Neste’s full-year 2025 Renewable Products EBITDA to be around €1 billion, which is lower than the consensus of €1.1 billion. The reduction in the price target reflects a lowered terminal valuation multiple, aligning Neste’s valuation more closely with its U.S. peers. These developments are part of the ongoing analysis and expectations surrounding Neste’s future performance.
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