7 Reasons Euronav Is Morgan Stanley's Best In Class Tanker Play

In a recent report, Morgan Stanley analysts initiated coverage on Euronav NV EURN at Overweight and named the company both its top pick in the crude tanker segment and its preferred way to play the current crude oil oversupply conditions. Low oil prices and swelling supply create big demand for floating storage, and analysts believe that will mean big profits for Euronav.
Here’s a list of seven key reasons analysts choose Euronav as their top pick.
1. In an environment that will be extremely favorable for crude tanker owners, Euronav is the largest among its peers, including Nordic American Tankers Ltd NAT, Teekay Tankers Ltd TNK, DHT Holdings Inc DHT, Tsakos Energy Navigation Ltd TNP and Frontline Ltd FRO.

2. Morgan Stanley has a $15.50 price target on Euronav stock, a 26 percent upside from recent levels.

3. Crude tanker rates are at their highest point in six years, as low oil prices and deep contango conditions have created huge demand for tanker storage.

4. Fleet growth remains near its lowest point in the past six years and the addition of new tankers will likely fall well short of the increased demand for storage.

5. Analysts believe that, with extreme contango conditions near their highest point in over five years, very large crude carrier (VLCC) rates have strong underlying support from the current oil futures market.

6. Euronav’s earnings are highly levered to the VLCC market rate, so the company will likely generate strong cash flow in the current environment.

7. As vessel values continue to increase, so will Euronav’s net asset value per share.