On Monday, TD Cowen’s analysts adjusted their outlook on Neste Oyj (NESTE:FH) (OTC: NTOIY), reducing the price target from €19.00 to €15.00 while maintaining a Hold rating on the stock. The stock, currently trading at $6.04, has declined over 57% in the past year. According to InvestingPro data, the company appears undervalued based on its Fair Value analysis. The revision comes ahead of Neste’s expected update on its full-year 2025 projections, which is scheduled to be presented with its fourth-quarter results on February 13.
The firm’s analyst, Jason Gabelman, anticipates that Neste will indicate a year-over-year flat Renewable Product sales margin for 2025, with Sustainable Aviation Fuel (SAF) production projected to be at 50% of capacity. This outlook aligns with recent trends, as InvestingPro data shows the company’s gross profit margin at 12.16% and revenue declining by 7.82% over the last twelve months. Gabelman suggests that an oversupply of SAF may hinder the ability of international companies to operate their SAF capacities at full utilization, which could influence Neste’s performance.
The analyst forecasts that Neste’s total sales volumes will be slightly better than the consensus, but expects the sales margin to be flat at approximately $420 per ton, compared to the consensus estimate of $455 per ton. The projection includes the likelihood that SAF sales might fall short of expectations, with only half of the total 1 million tons per annum capacity being utilized due to industry oversupply. Notably, three analysts have recently revised their earnings estimates downward for the upcoming period, according to InvestingPro, which offers detailed analysis of over 20 additional key metrics and insights for subscribers.
Gabelman’s revised forecast for Neste’s full-year 2025 Renewable Products EBITDA stands at roughly €1 billion, which is below the consensus of €1.1 billion. For context, the company’s current EBITDA stands at $1.43 billion. The reduction in the price target primarily reflects a lowered terminal valuation multiple from 8x to 7x, aligning Neste’s valuation more closely with that of its U.S. peers. The updated price target set by TD Cowen is $8.00 or €15.00, down from the previous $10.00 or €19.00.
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