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On Wednesday, RBC Capital Markets adjusted its outlook on BP Plc (NYSE:BP:LN) (NYSE: BP), reducing the oil and gas company’s price target from GBP 4.80 to GBP 4.50. The firm has kept its Sector Perform rating on the stock. The revision follows BP’s recent trading update and financial results for the first quarter, which did not meet expectations. Currently trading at $28.07, near its 52-week low, InvestingPro analysis suggests BP is undervalued, with multiple growth catalysts identified in their comprehensive research report.
The RBC Capital analyst, Biraj Borkhataria, noted that after BP’s strategic overhaul earlier in the year, the emphasis has now turned to the company’s performance. The first quarter marked another period where the market’s expectations were lowered following a trading update, leading to results that were weaker than anticipated. With a market capitalization of $74 billion and last twelve months EBITDA of $27 billion, BP remains a significant player in the energy sector.
Borkhataria pointed out that BP’s net debt and free cash flow (FCF) are projected to stay weaker compared to its industry peers. He also mentioned potential downside to the consensus earnings for the year 2025. The analyst stated, "We expect net debt and FCF to remain weak vs peers and see downside to 2025 consensus earnings." Despite these concerns, InvestingPro data shows BP maintains a moderate debt-to-equity ratio of 1.21 and offers a substantial dividend yield of 6.77%. For deeper insights into BP’s financial health and growth prospects, investors can access the detailed Pro Research Report, available exclusively on InvestingPro.
Despite the lower price target, RBC Capital has decided to maintain its Sector Perform rating for BP stock. The analyst concluded by saying, "We continue to see better risk-reward elsewhere and maintain our Sector Perform rating with a lower 450p PT." This suggests that while there has been a reduction in the expected stock value, the firm does not recommend a change in the stock’s rating at this time. InvestingPro subscribers can access additional insights, including 12 more exclusive ProTips and comprehensive valuation metrics for BP.
In other recent news, BP has announced a strategic shift by selling a 25% non-controlling stake in BP Pipelines (TANAP) to Apollo Global for approximately $1 billion. This move aligns with BP’s broader strategy to achieve $20 billion in divestments by 2027, while still retaining control as the majority shareholder of the unit. Additionally, BP has paused its $2.2 billion biofuels expansion at its Castellon refinery in Spain due to slower-than-expected market growth, although it continues to explore potential biofuels projects in Rotterdam.
In the Gulf of Mexico, BP is considering selling minority stakes in its Kaskida and Tiber projects, with each possibly valued at billions of dollars. These deliberations are part of BP’s refocusing efforts on oil and gas. Meanwhile, activist investor Elliott Management is seeking support from BP shareholders for potential changes, including cost reductions and leadership restructuring, following BP’s recent strategic pivot back to hydrocarbons.
These developments come as BP aims to boost earnings and regain investor trust, with further collaborations with Apollo Global being explored in areas such as infrastructure and low-carbon energy assets.
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