3 Reasons Why This Petrobas Analyst Is Bullish: 'Prior Risks Have Diminished'

Shares of Petroleo Brasileiro PBR, or Petrobras, rose in early trading on Wednesday, maintaining their uptrend so far this year.

Despite the recent rally of around 50% gains, the current valuation of the company’s stock remains attractive, according to Goldman Sachs.

The Analyst: Bruno Amorim upgraded the rating for Petrobras to Buy, while maintaining a price target of $18.10.

The Thesis: Prior risks have diminished, after the new government provided some clarifications on the policies to be adopted, Amorim said in the upgrade note.

Check out other analyst stock ratings.

The analyst cited the easing of these 3 tail risks as the reason for the upgrade:

• Dividends: Management believes “25% payout on earnings is too low” and mentioned buybacks as an option.
• Fuel Prices: “The new pricing policy is not straightforward but points to PBR still following international price trends (even if with a delay and/or a small discount vs international prices),” Amorim wrote.
• Capital Allocation: “Low carbon initiatives capex is guided to move from 6% of total capex to up to 15% thus limiting the amount to be disclosed in November together with the new strategic plan,” he added.

PBR Price Action: Shares of Petrobras had risen by 2.70% to $14.62 at the time of publishing Wednesday.

Image: Petroleo Brasileiro