Morgan Stanley Downgrades Repsol SA Stock with Lowered Price Target
In a recent update, Morgan Stanley downgraded Repsol SA (REP:SM) from Overweight to Equalweight, with a revised price target of €15.20, down from the previous €17.70. The downgrade was a result of Repsol's underperformance in the sector, particularly due to challenging refining conditions.
Repsol's refining margins have seen a significant decline, with the Spanish refining indicator margin dropping to $6.3 per barrel in the second quarter, a 45% decrease from the previous quarter. Despite expectations of improved margins in the third quarter, no significant increase has materialized, leading to the downgrade.
Morgan Stanley's outlook for the refining sector predicts a return to pre-2022 margin levels in the Atlantic basin by 2025. This projection, along with lowered assumptions for Repsol's refining margins and weaker oil and gas price forecasts, has resulted in a significant reduction in earnings per share and cash flow forecasts for Repsol for the years 2024 to 2026.
In conclusion, investors should take note of Morgan Stanley's revised stance on Repsol and consider the potential impact on the company's financial performance in the coming years. It is advisable to monitor the refining sector trends and adjust investment strategies accordingly to mitigate risks and capitalize on opportunities.