🎈 Up Big Today: Find today's biggest gainers with our free screenerTry Stock Screener

TotalEnergies stock rises on RBC upgrade

Published 05/12/2024, 11:24 pm
© Reuters
TTEF
-

Investing.com -- Shares of TotalEnergies SE (EPA:TTEF) rose following an upgrade from RBC Capital Markets, which elevated its rating on the company to "outperform" from "sector perform." 

The revised outlook was based on several factors, including a reassessment of the company’s valuation, strategic positioning, and longer-term growth prospects.

TotalEnergies has recently faced a period of underperformance, lagging behind its peers by over 15% since the summer. 

This downturn was attributed to a combination of macroeconomic and company-specific challenges, such as uncertainties in French politics, including potential tax changes and budget debates, as well as issues related to investments in Adani Green Energy (NS:ADNA) amid an ongoing investigation. 

Despite these concerns, RBC noted that the market reaction has been disproportionate, with TotalEnergies’ market capitalization dropping by about $20 billion since early November.

RBC analysts highlighted that the company’s fundamentals remain intact, supported by a credible growth trajectory and a leading integrated power strategy. 

TotalEnergies is currently investing heavily in growth projects, which has impacted near-term free cash flow yields. 

However, the firm argues that these investments position the company for FCF growth in the coming years, especially as global gas prices recover and the company benefits from its LNG and upstream operations.

The valuation of TotalEnergies, which trades at a modest premium relative to its European peers, was another key driver behind the upgrade. 

RBC said that this premium is justified due to TotalEnergies’ potential to deliver robust total shareholder returns in 2025, estimated at 12.7%, the highest among its peers. 

The brokerage also noted that, unlike some competitors who are expected to scale back buybacks, TotalEnergies’ execution on shareholder-friendly policies could enhance its attractiveness to investors.

Additionally, TotalEnergies' "clean-firm power" strategy was described as a competitive advantage. 

The company’s plans to integrate renewables into its portfolio, alongside traditional energy production, make it a unique player in addressing the anticipated surge in global power demand. While the company has paused some U.S. offshore wind projects due to regulatory shifts, RBC sees its broader renewable strategy as well-aligned with market trends.

The upgrade included a new price target of €80, reflecting an upside from its recent trading levels around €54. 

Analysts noted that near-term risks, including political uncertainties in France and execution challenges for key projects, are already factored into the stock’s current valuation, presenting an opportunity for long-term investors.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.