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On Wednesday, Citi analysts upgraded TotalEnergies (EPA:TTEF) SE (TTE:FP) (NYSE:TTE) stock from Neutral to Buy, increasing the price target to €70.00 from the previous €61.00. The upgrade was based on the assessment that TotalEnergies, with its substantial market capitalization of $144 billion and attractive P/E ratio of 9.5, is becoming the premium-quality energy company for investors seeking benchmark weighting in Europe. The analysts believe that the market has yet to fully recognize the potential for growth in the company’s core Upstream business. According to InvestingPro data, three analysts have recently revised their earnings estimates upward for the upcoming period.
Citi’s analysts pointed out that TotalEnergies is poised to benefit from a lower equity-risk premium in Europe, which they see as undervalued. They predict that from 2024 to 2030, the company’s compounded free cash flow (CFFO) will grow at a real rate of 6% per annum, which is notably higher than its European counterparts. This growth expectation, combined with the company’s impressive 49-year track record of consistent dividend payments and current yield of 3.86%, makes it particularly attractive to income-focused investors. The growth outlook is supported by a forecasted CFFO for 2028-2030 that is 11% higher than the market expectations aggregated on VisibleAlpha.
The analysts emphasized the potential for volume and margin growth within TotalEnergies’ core Upstream business as a key driver for the positive outlook. This segment of the company’s operations is expected to contribute significantly to the overall growth trajectory, underpinning the upgraded rating and price target.
TotalEnergies’ stock upgrade reflects Citi’s confidence in the company’s strategic positioning and its ability to deliver robust financial performance in the coming years. The revised price target of €70.00 represents a substantial increase from the previous target, signaling Citi’s heightened expectations for the company’s value.
Investors and market watchers will likely monitor TotalEnergies’ performance closely, particularly in the Upstream sector, to see if the company can meet or exceed the growth projections that have led to this optimistic assessment by Citi analysts. The upgrade serves as a noteworthy indicator of TotalEnergies’ potential in the European energy market. InvestingPro analysis suggests the stock is currently undervalued, with a strong YTD return of 17.7% and an overall financial health score of "GOOD." For deeper insights into TotalEnergies’ valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
In other recent news, TotalEnergies has announced several significant developments. The company has secured a record green hydrogen deal with RWE (LON:0HA0) in Germany, committing to supply its Leuna refinery with 30,000 tons of green hydrogen annually for fifteen years starting in 2030. This agreement marks the largest commitment to green hydrogen procurement in Germany. Additionally, TotalEnergies has entered into a substantial agreement with the Gujarat State Petroleum Corporation to supply 400,000 metric tons of liquefied natural gas (LNG) annually, beginning next year, as part of India’s growing energy market.
In another development, TotalEnergies is part of a consortium set to sign an oil production-sharing contract with Guyana, further diversifying the country’s oil sector. The company is also contemplating importing green hydrogen from a project under development in Brazil, potentially enhancing its European refineries’ green credentials. Lastly, Egypt has secured a deal for 60 LNG cargoes for 2025 with TotalEnergies and Shell, ensuring the country’s future LNG needs are met. These recent developments underscore TotalEnergies’ strategic moves in the energy sector across different regions.
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