Citi maintains Buy rating and GBP5.15 target for BP stock

On Tuesday, Citi reaffirmed its confidence in BP Plc (NYSE:BP:LN) (NYSE: BP), maintaining a Buy rating and a price target of GBP5.15 ($6.81). The endorsement follows BP’s recent strategic update, which Citi analysts have incorporated into their financial model. According to InvestingPro analysis, BP currently appears undervalued, with the stock showing a Fair Value upside potential.

The London-based energy giant’s production outlook has been kept intact by Citi, aligning with the lower end of BP’s newly announced guidance range. The company has demonstrated financial resilience with a strong dividend track record, maintaining payments for 34 consecutive years and achieving a current yield of nearly 6%. Adjustments were made to the unit depreciation cost assumptions to reflect the higher costs experienced during the 2023-24 period. These changes were somewhat balanced by the anticipated cost savings per barrel.

Despite these revisions, Citi’s forecast for BP’s average earnings per share (EPS) from 2025 to 2030 experienced only a slight decrease of 3%. The investment firm’s analysts believe that the overall impact of the adjustments on BP’s financial prospects is minimal, leading them to retain both their target price of 515 pence per share and their optimistic Buy rating. BP’s financial health score on InvestingPro is rated as "FAIR," with particularly strong marks in price momentum and relative value metrics.Discover 10 more exclusive insights about BP and access comprehensive financial analysis through InvestingPro, including the detailed Pro Research Report available for this prominent energy player.

BP shares continue to be traded on both the London Stock Exchange (LON:LSEG) and the New York Stock Exchange, where investors can gauge the market’s reaction to Citi’s latest assessment and BP’s strategic direction.

Citi’s analysis and subsequent rating serve as a gauge for investors looking to understand the potential of BP stock in the face of the company’s strategic adjustments and the broader energy market dynamics.

In other recent news, BP Plc has announced a strategic overhaul, reducing its capital expenditure on transition engines from $7 billion to a range of $1.5 billion to $2 billion annually. This move shifts focus towards oil and gas projects, expected to enhance production by 2030 and expand volumes by 2035. Analysts at Bernstein have reiterated an Outperform rating for BP with a price target of GBP5.70, highlighting the company’s strategic pivot to its core operations. Additionally, JPMorgan has upgraded BP’s stock from Underweight to Neutral, raising the price target to £5.10, citing the potential value of BP’s stake in Rosneft and recent activist interest.

In a legal development, BP and Reliance Industries (NSE:RELI) lost a decade-long gas drilling dispute in India, with the Delhi High Court ruling against them. Despite the ruling, Reliance Industries may appeal to the country’s top court. Meanwhile, Elliott Capital Management has acquired nearly a 5% stake in BP, urging the company to focus on a substantial divestment program without advocating for increased oil and gas expenditure.

BP’s strategic shift involves new exploration and production decisions, including projects in India and Iraq. This realignment could potentially drive growth, moving away from previously stated green energy targets. Investors are closely monitoring these developments as BP navigates its strategic direction in the energy sector.

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