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Tuesday, CFRA analyst Alex Goh reduced the price target on Galp Energia (ELI:GALP:SM) (OTC: GLPEY (OTC:GLPEY)) to EUR10.00 from the previous target of EUR13.00, while still recommending a Sell rating on the stock. The revision reflects a valuation based on a forward P/E ratio of 10.3x for the year 2025, which is 0.5 standard deviations below the company’s five-year average P/E of 14.6x. According to InvestingPro data, the stock is currently trading near its 52-week low of $6.76, with an RSI indicating oversold conditions. The stock has experienced a significant decline of 23% over the past six months.
The price target adjustment comes after Galp Energia’s first-quarter trading update for 2025 showed a quarter-over-quarter production decrease of 5% and a year-over-year decline of 3%, resulting in a production level of 104 thousand barrels of oil equivalent per day (kboepd). Additionally, the amount of raw materials processed dropped by 3% quarter-over-quarter and 4% year-over-year to 21.6 million barrels of oil equivalent. Despite these challenges, InvestingPro analysis shows the company maintains strong financial health with a current ratio of 1.72 and operates with a moderate debt level, as indicated by a debt-to-equity ratio of 1.05.
Galp Energia’s refining margin for the first quarter was reported at USD5.60 per barrel of oil equivalent, which is half of what it was the previous year, despite a slight 7% increase from the previous quarter. However, the company did see an improvement in its natural gas supply, which rose by 13% year-over-year and 14% quarter-over-quarter. Despite natural gas only representing 12% of the company’s upstream production in 2024, this increase could provide some offset to the lower margins.
In light of these results, CFRA has reduced its earnings per share (EPS) forecast for Galp Energia in 2025 by 15% to EUR0.97. This adjustment takes into account the anticipated impact of lower crude oil prices and refining margins. However, the firm’s EPS forecasts for 2026 remain largely unchanged, as they include an expected additional production of 40k boepd from Galp’s 20% stake in Brazil’s Bacalhau project.
Goh’s report indicates that due to the deteriorating near-term earnings prospects, the Sell rating on Galp Energia’s stock is being maintained. The company’s financial performance and market valuation are closely monitored by investors, with such adjustments to price targets and ratings potentially influencing market activity. InvestingPro reveals that three analysts have recently revised their earnings upward for the upcoming period, and the company has maintained dividend payments for 18 consecutive years, currently offering a 2.3% yield. Subscribers can access 8 additional ProTips and comprehensive financial metrics to make more informed investment decisions.
In other recent news, Morgan Stanley (NYSE:MS) has upgraded Galp Energia’s stock rating from Underweight to Equal-weight. This adjustment, made by analyst Sasikanth Chilukuru, comes with a slight reduction in the price target from €15.40 to €15.20. The revision reflects a nuanced view of Galp Energia’s prospects, particularly concerning its operations in Namibia and financial forecasts. Despite uncertainties surrounding the Namibian project, Morgan Stanley sees potential value in a farm-down strategy due to the declining implied value of the Mopane asset. The company’s financial outlook was a significant factor in the rating change, with a forecasted average free cash flow yield of approximately 6.8% from 2025 to 2027. This yield is expected to be 3.7% excluding disposal effects, while the average yield from distributions, including dividends and buybacks, is projected to be around 6.7%. The new price target incorporates the latest company guidance and oil price forecasts, suggesting limited upside potential for the stock.
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