Petrobras shares back on analysts’ radar
Petrobras shares are back on analysts’ radar with the reduction of political risks for the company. The new policy on fuel prices, less interventionist than expected, and the more moderate board of directors have reversed the pessimism over the stock after the elections.Now, six banks have a buy recommendation for Petrobras shares, according to an analysis by Valor. Other nine maintain a neutral recommendation and one suggests selling it. Two of the buy recommendations came last week.At the beginning of May, when there were still doubts about the direction of Petrobras’s pricing policy and dividends, there were four buy recommendations, 11 neutral recommendations, and one sell recommendation.The change in sentiment came after Petrobras announced its new fuel pricing policy. The oil company dropped the link to import parity prices and replaced it with a formula that takes into account the customer’s alternative costs and the marginal value to the company.There was a consensus among analysts that the changes were negative because they meant a departure from international parity as the primary method of pricing. But, at the same time, fears of more direct state intervention in the sector did not materialize.Recent remarks by Petrobras’s new executives to the press and in meetings with banks have also contributed to this change in sentiment around the stock and the "benefit of the doubt" that the market has given to CEO Jean Paul Prates to implement changes in the coming months.J.P. Morgan and Morgan Stanley, two of the largest U.S. banks covering Petrobras, raised their recommendations for the company’s American Depositary Receipts (ADRs) traded on the New York Stock Exchange (NYSE) to buy from neutral given a scenario of reduced risks around the stock.The two banks had price targets at the bottom of Valor’s survey, J.P. Morgan at $11.50 and Morgan Stanley at $12.50, reflecting a more cautious view of the company’s future. The prices have since risen to $15.50 and $16.50, respectively.J.P. Morgan analysts Rodolfo Angele, Milene Clifford Carvalho, and Henrique Cunha wrote that the market perception now is that Petrobras’s new board is not expected to make drastic changes in its strategy, contrary to pessimistic post-election expectations.They note that Petrobras is expected to increase investments in low-carbon projects, but the focus remains on pre-salt and deepwater, while the new dividend policy is likely to follow the example of what...
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