All eyes are once again on the Middle East and the escalation of the conflict between Israel and Iran, the latter having launched 200 missiles on the Jewish state on Tuesday (in response to the land invasion of Lebanon by Israel). And, with this new escalation of the conflict, the eyes of investors are turning to oil and therefore also to the oil companies. Among large European companies, Repsol is the one with the greatest upside potential for the months to come..
A third of global oil production is concentrated in the conflict region, which means that any change in the conflict will have a strong impact on the price of crude oil, even despite the current situation in the commodity market, with a supply surplus (which led Brent to cross the level of 70 dollars per barrel for the first time since 2021). During these last two sessions, the reference price in Europe recovers 75 dollars after having progressed by more than 5% and reduced its annual losses to 4%.
The rise in crude oil these days has also revived the main companies in the oil sector of the Old Continent. The Stoxx 600 Energy has recorded gains of just over 3.5% since October 1, but the increases per company are even greater: Equinor is up 5.7% over this period and BP is also up more than 5%; Shell, Eni and TotalEnergies recorded increases of more than 4% and Repsol and Galp achieved increases of more than 2.5%.
Of all, only Shell and Galp are saved the claws of the negative in practice and record annual balances of around 4% and 30% respectively. However, regarding the possible increases in the coming months, the experts are clear: Repsol will be the one that increases the most.
Analysts give it on average an upside potential for the shares of the Spanish oil company of 29%with which it could erase the losses accumulated during the year by approximately 9%. With this trajectory, the price of its shares would reach 15.71 euros, placing its price at the levels of last April. Furthermore, the company still realizes this potential, even after the reduction in price targets made this Wednesday by Citi and Oddo, going from seeing the company respectively at 17 euros and 18.5 euros per share to now valuing it at 14.50 euros. and 15 euros. . However, there are still up to 14 investment banks that continue to estimate the price of Repsol on the stock market at 17 euros or more, which would allow the company to return to, at least, 2018 levels (and with this valuation potential could be 42% or more).
This upside potential contrasts with that of the rest of the continent’s oil companies, although that of some of them is also notable. Indeed, the increases in BP, Galp and Shell stand out, respectively by 27%, 21% and 20%.
The Spanish company also retains one of the best expert buying recommendations among these companiessecond only to Shell’s advice. From Barclays, one of the analytical teams that advise the acquisition of its shares, they justify this opinion by stating that “the shares trade on par with their peers, but we see potential catalysts linked to dividends and their wallet”.
Based on 2024 profits (which experts estimate at just over 3.4 billion euros), the oil company is expected to distribute a dividend of 0.93 euros per share which, after the latest increases, still ensures profitability close to 8%the second most attractive remuneration in the sector behind that of Equinor, at 10% (even if the experts’ recommendation is to sell). Added to this is the possible share buyback that Repsol could carry out.
