Deutsche Bank Downgrades Euronav (EURN) and Teekay Tankers (TNK) to Hold

Deutsche Bank downgraded Euronav (NYSE: EURN) from Buy to Hold with a price target of $8.50 (from $18.00). Teekay Tankers Ltd (NYSE: TNK) was downgraded to Hold with a price target of $5 (from $8). Analyst Amit Mehrotra expressed caution related to crude tanker supply.

"We first wrote about our concerns on crude tanker supply in May of last year, when we characterized the rising order book as 'flashing yellow light'. We are now raising our assessment of the threat level to 'Red'," said Mehrotra.

"The revision reflects continued increase in the order book (we estimate VLCC and Suezmax supply growth of 100 vessels (net) by the end of 2017, which is exactly double the increase projected back in May), as well as our observations of past ordering cycles. To the latter point, we note that monthly crude tanker newbuilding orders are running at 17 vessels on a 12mo rolling average basis. This is about in-line with the peak of the last 4 ordering cycles of the last 20yrs, all of which directly preceded sharp and sustained declines in rates. The bulls will argue that this time it’s different – underpinned by extraordinary demand drivers – but we’re skeptical that current demand trends are sustainable and/or structural. Against such a backdrop we cannot recommend crude tanker equities any longer and as such downgrade Teekay Tankers (TNK) and Euronav (EURN) to Hold from Buy," added the analyst.

For an analyst ratings summary and ratings history on Euronav click here. For more ratings news on Euronav click here.

Shares of Euronav closed at $10.38 yesterday.

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