JPMorgan resumes Santos stock coverage with Overweight rating

Investing.com - JPMorgan has resumed coverage of Santos Ltd. (ASX:STO), a $13.65 billion market cap energy company, with an Overweight rating and a price target of AUD7.90 for December 2026, according to a research note released Monday.

The investment bank previously had an Overweight rating with a June 2026 price target of AUD7.70 before entering a restricted period on the stock. JPMorgan now identifies Santos as its top pick in the Australian Oil & Gas sector, citing potential upside of 22%.

The firm notes Santos is trading at 4.5x EV/EBITDA, below its long-term average of 5.5x (current actual multiple: 5.96x according to InvestingPro), while key growth projects Barossa and Pikka are approaching completion with reduced timeline risks. JPMorgan highlights that the company’s capital expenditure has peaked and free cash flow is accelerating. The company’s overall financial health score is rated as FAIR, with particularly strong scores in profitability and cash flow metrics.

These improvements are expected to translate into increased shareholder distributions, according to the research note. Despite challenging market conditions, JPMorgan believes Santos is well-positioned with a large proportion of contracted LNG, low operating costs, and improving balance sheet metrics.

The investment bank concludes that Santos is in a strong position to outperform its peer group in the sector.

In other recent news, Santos Ltd. has seen a flurry of activity following the withdrawal of takeover bids by both the XRG consortium and Adnoc. Goldman Sachs has reinstated its coverage on Santos with a Buy rating, citing the company’s major growth projects, Barossa and Pikka, which are expected to generate significant free cash flow over the next five years. CLSA has also maintained its Outperform rating on Santos, despite the withdrawal of Adnoc’s bid, indicating potential short-term downside risks. Meanwhile, RBC Capital has downgraded Santos from Outperform to Sector Perform after reviewing the company’s second-quarter 2025 results, which showed revenue exceeding expectations but production aligning with forecasts. These developments highlight varying analyst perspectives on Santos’s future performance amid recent acquisition uncertainties.

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