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On Wednesday, TD Cowen’s analysts revised their outlook on BP shares (NYSE: NYSE:BP), downgrading the stock from Buy to Hold and adjusting the price target from $40.00 to $36.00. The change in coverage comes as Jason Gabelman takes over from Menno Hulshof. According to InvestingPro data, BP currently offers a substantial 5.55% dividend yield and has maintained dividend payments for 34 consecutive years, demonstrating strong shareholder returns despite market fluctuations.
In their assessment, TD Cowen bases BP’s valuation on a net present value (NPV) of the company’s free cash flow (FCF) up to the year 2030, considering this year as a mid-cycle terminal point. Their financial model incorporates strip pricing through 2025 followed by a $65 Brent oil price assumption thereafter.
According to Gabelman, BP is currently trading at 3 times its expected enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This valuation is 0.8 times below the stock’s recent historical average. The analysts project that BP will have a free cash flow yield of 8.2% from 2025 to 2027, which is closely aligned with the historical average yield of 8% for the group.
The downgrade reflects a more conservative stance on the stock, implying that the analysts see limited upside potential for BP’s share price at this time. The reduced price target of $36.00 represents a downward revision from the previous target of $40.00, indicating a tempered expectation for the stock’s performance.
Investors in BP shares will be monitoring the market’s reaction to TD Cowen’s updated rating and price target as they assess their positions in the energy company.
In other recent news, BP Plc has reported a significant drop in profits for 2024, prompting a strategic shift back to its core oil and gas operations. This move comes as the company seeks to align with competitors like Shell Plc. CEO Murray Auchincloss’s compensation was reduced by 30% due to the company’s underwhelming financial performance, despite an increase in his base salary. Additionally, BP is undergoing a strategic review of its lubricant business, with Saudi Aramco (TADAWUL:2222) reportedly interested in acquiring BP’s Castrol brand assets.
Citi has maintained a Buy rating on BP, with a price target of GBP5.15, reflecting confidence in the company’s strategic updates. Similarly, Bernstein has reiterated an Outperform rating with a target of GBP5.70, noting BP’s strategic pivot to increase oil and gas production while reducing capital expenditure on transition engines. Meanwhile, JPMorgan has upgraded BP’s stock rating from Underweight to Neutral, raising the price target to £5.10, citing the potential value of BP’s stake in Rosneft and the company’s modest exposure to volatile gas markets.
These developments highlight BP’s ongoing efforts to adapt to market conditions while balancing profitability and sustainability. Investors are closely monitoring BP’s strategic direction and potential mergers, which could impact its market position and financial performance.
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