UPDATE: HSBC Downgrades BP Plc. (BP:LN) (BP) to Hold
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HSBC analyst Gordon Gray downgraded BP Plc. (BP:LN) (NYSE: BP) from Buy to Hold with a price target of GBP3.60 (from GBP3.65).
The analyst comments "Market perceptions of risks around the energy transition aren’t going away in the next few years, in our view. In BP’s case, its big strategy launch under new CEO Bernard Looney only occurred last February. This has pointed to such a fundamental reshape of BP that we think it calls into question how relevant valuation history prior to that date really is at all. We could argue that it should be realistic for BP to regain the sorts of valuations it saw soon after the relaunch, but before the worst of the pandemic. These look undemanding relative to earlier history, but would still imply roughly 20-25% upside on P/CF relative. Our concern, though, is how long it could take for such a re-rating to materialise. If it is to come from greater investor confidence in BP’s ability to manage the energy transition, we think this could be a multi-year process (and way beyond the time-frame for our target price). Moreover, there are real risks that just as BP makes good progress on its energy transition strategy, the market continues to demand more in this regard from it and from its peers. Any significant investor momentum to push for absolute emissions reductions to be extended to all BP’s hydrocarbon sales (rather than just those on its produced hydrocarbons) could call much of its growth strategy into question."
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