Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
Investing.com -- Goldman Sachs has downgraded Neste Oyj (HE:NESTE) to “neutral” from “buy,” pointing to the Finnish refiner’s strong performance and its shares trading at a premium to replacement cost.
The brokerage said the catalysts that previously underpinned its bullish view, such as tightening renewable diesel and sustainable aviation fuel markets, have largely played out.
“Neste’s share price is up 38% ytd and 140% since the trough in April 2025 (in EUR), resulting in current market EV of $21 bn,” Goldman Sachs said.
“We estimate total replacement cost at $18.8bn, which implies Neste now trades at a c.10% premium to asset replacement cost value.”
The downgrade came as Goldman Sachs kept its 12-month price target unchanged at €17.00, compared with the closing price of €17.28 on Sept. 16.
That implies a downside of 1.6%. The bank said while medium-term upside remains, near-term earnings momentum looks limited. “We now see less near-term earnings upside and therefore take Neste off the Buy list and lower our rating to Neutral,” the analysts said.
Goldman Sachs projected third-quarter renewable products margin at $440 per ton, slightly above the $425 per ton consensus.
But it flagged higher operating costs from scheduled maintenance at plants in Rotterdam and Singapore as a headwind.
“We therefore model $420/t RES margin in Q4, down $20/t qoq and marginally below $440/t consensus,” the report said.
Following earnings forecasts ahead of third-quarter results, adjustments were made to EBITDA estimates.
For 2025, estimates were revised upward by 3%, for 2026, the estimates were revised downward by 6%, similarly, for 2027, the estimates were revised downward by 3%, reflecting updated margin assumptions and currency effects. Goldman now expects EBITDA of €1.39 billion in 2025, rising to €2.50 billion by 2027.
The brokerage said it remains above consensus longer term, forecasting 2026 and 2027 EBITDA 14% and 12% higher, respectively.
It expects average renewable sales margins of $530 per ton in 2026, supported by tighter supply-demand balances in Europe and U.S. regulatory measures.
“We maintain a positive view on 2026 renewable diesel demand in Europe/the US, especially on 2H of the year,” the brokerage said.
Neste’s net income is forecast to grow from €278.2 million in 2025 to €1.15 billion in 2027, with earnings per share rising from €0.36 to €1.50 over the same period.
Dividend yield is expected to improve from 2.3% in 2025 to 3.6% by 2027. Net debt-to-EBITDA is projected to fall from 3.1x in 2025 to 1.2x by 2027.
Despite the downgrade, Goldman Sachs pointed to cash flow improvements once the Rotterdam expansion is completed in 2027, which is expected to increase volumes and lower capital expenditures. “On our estimates, Neste trades at a 5% FCF yield in 2026 and 10% in 2027,” it said.
The analysts added that while the medium-term outlook is constructive, current valuation leaves little room for near-term gains.