On Wednesday, JPMorgan (NYSE:JPM) issued a downgrade for Technip (EPA:FTI) Energies NV (TE:FP) stock from 'Neutral' to 'Underweight', adjusting the price target to EUR26.00 from a previously unspecified figure. The investment firm expressed increased caution regarding the company's future, particularly in its strategic focus on technology offerings and leadership in New Energies.
The rationale behind the downgrade stems from observations that Technip Energies has struggled to scale its smaller contracts into larger, more lucrative projects. Despite the recent announcement of the BP (NYSE:BP) Net Zero Teesside contract, the firm has not seen a significant number of contracts in the range of EUR 100 million converting into the larger EUR 0.5-1 billion category.
JPMorgan anticipates that 2025 will bring a shift towards multi-energy capital efficiency, which could lead to approximately a 30% reduction in capital expenditure budgets for new energies. This anticipated change poses further challenges for Technip Energies.
Moreover, there is uncertainty surrounding the level of capital expenditure that will be necessary for Technip Energies to invest in new business verticals. The analyst highlighted that the costs associated with these 'adjacent business model investments' are not factored into the group's current guidance, adding another layer of risk for the company's financial outlook.
The downgrade reflects a cautious stance on the company's ability to capitalize on its New Energies segment amid a landscape where capital efficiency is becoming increasingly important and budget cuts in this area are expected.
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