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Bernstein SocGen Group upgraded Galp Energia (ELI:GALP:SM) (OTC:GLPEY) from Market Perform to Outperform on Tuesday, maintaining a price target of EUR20.00 for the Portuguese energy company. The stock has shown strong momentum with a 15% gain year-to-date, though InvestingPro data indicates the stock is currently trading in overbought territory.
The upgrade marks the first time Bernstein has raised its rating on Galp since assuming coverage of the stock. The firm cited three visible catalysts supporting its more positive outlook, with strong production growth leading the list of favorable factors. With a solid financial health score and a 19-year track record of consistent dividend payments, as reported by InvestingPro, the company demonstrates strong fundamentals.
Bernstein highlighted near-term growth potential from the Equinor-operated Bachalau oilfield in Brazil’s pre-salt region, where Galp holds a 40% partnership stake. The firm projects Galp will deliver approximately 12% production growth in 2026, significantly outpacing the sector average of 2%.
The research firm also pointed to Galp’s expected 2025 return on average capital employed (Roace) of 12.6%, which stands well above the sector’s 9.7%. The company’s current return on invested capital stands at 11%, with a healthy gross profit margin of 29%. Longer-term growth beyond 2030 is expected to come from Namibia’s Mopane development.
For Galp, currently Bernstein’s smallest producer at approximately 108 thousand barrels per day in 2024, the firm forecasts production to reach about 134 thousand barrels of oil equivalent per day by 2027. Operating with moderate debt levels and maintaining liquid assets above short-term obligations, the company appears well-positioned for this expansion. Bernstein noted that Namibia could potentially contribute as much volume to Galp as the firm’s projected total group production by 2027.
In other recent news, Galp Energia has been the subject of several analyst updates. CFRA analyst Alex Goh reduced the price target for Galp Energia to EUR10.00, maintaining a Sell rating on the stock. This adjustment follows Galp Energia’s first-quarter update for 2025, which reported a 5% decrease in production quarter-over-quarter and a 3% year-over-year decline, bringing production to 104 thousand barrels of oil equivalent per day. The company’s refining margin also saw a significant drop to USD5.60 per barrel, which is half of the previous year’s margin. Despite these challenges, there was a notable improvement in Galp Energia’s natural gas supply, which increased by 13% year-over-year.
In contrast, Morgan Stanley (NYSE:MS) analyst Sasikanth Chilukuru upgraded Galp Energia from Underweight to Equal-weight, though the price target was slightly reduced to €15.20 from €15.40. This change reflects a balanced view of Galp Energia’s prospects, especially in light of uncertainties around its Namibian project. Morgan Stanley projects Galp Energia’s average free cash flow yield to be about 6.8% from 2025 to 2027, with the yield from distributions expected to be around 6.7%. These developments highlight the varying perspectives on Galp Energia’s financial outlook among analysts.
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