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Investing.com -- Shares in biofuel maker and oil refiner Neste retreated around 2% on Friday after both Bank of America (BofA) and Citi downgraded the Finnish group, arguing that the stock now trades above its intrinsic value following a sharp rally.
Bank of America cut its rating to Neutral from Buy, raising its price objective to €15 from €13, but warning the stock is “squeezed up close to full value.”
Analysts said that while Q2 earnings were stronger than expected and estimates have been revised up by around 20% for 2025–27, “our updated sum-of-the-parts valuation is no longer able to point at significant share price upside potential.”
At the current price, the shares imply a 2025E EV/EBITDA multiple of 20x for the Renewable Products division, BofA said.
Similarly, Citi downgraded Neste from Neutral to Sell/High Risk.
“It makes no sense to us, especially in what is fundamentally a well-supplied biofuels market, that Neste’s market value now trades above what we think is replacement cost,” said analyst Alastair R. Syme.
They set a target price of €11.80, implying over 20% downside.
The bank acknowledged improved operational execution and rising industry margins, but warned of structural challenges, citing high renewable fuel prices and potential policy risks:
“There is a strong argument that refinery co-processing is the lowest marginal cost of supply, and therefore will be increasingly endorsed by policy.”
Both banks upgraded their earnings estimates following Neste’s better-than-expected second quarter, driven by a sharp rebound in Renewable Products performance.
However, BofA noted that further improvements may take longer to materialize due to upcoming maintenance outages.
Citi, meanwhile, raised its 2025 EPS forecast by nearly 300% but still questioned the company’s valuation.
“We struggle to see value for equity above €11.8/share,” it said.
Despite the turnaround in earnings and operational delivery, both firms believe the current share price has run ahead of fundamentals.
Neste on Thursday reported solid second-quarter core earnings, driven by a surge in sustainable aviation fuel (SAF) sales.
Comparable EBITDA rose 42% year-on-year to €341 million, beating the €302.5 million average forecast in a company-compiled consensus.