Brazil’s Petrobras Stock Price To Recover – Regardless Who Wins Elections, Bank Of America Says

Photo courtesy of the Financial Times

Brazil’s state-run energy firm, Petróleo Brasileiro S.A. or Petrobras, whose stock price was at nearly $50 in early 2010, has seen its share price battered over the years amid concerns over the company’s soaring debt and profitability.

Over four years later, and not much has changed.  A continual slide in its share price, which had fallen close to $10 in mid-march before a steady climb back up to over $20 in early September on hopes that President Rousseff would be defeated in the national elections.

But recently the firm has come under renewed pressure amid scandals, a recent plunge in global oil prices, and as support for Rousseff rebounds.  All of these factors rattled investors and caused heavy selling which drove the share price falling back to just above $12.

However, the world’s most volatile stock, according to Bloomberg, is poised for recovery following Brazil’s presidential election, regardless of who wins the elections, according to Bank of America, as Bloomberg reports.

Bank of America analysts Fank McGann and Vicente Falanga Neto argue that Petrobras’s share price discounts an “extremely negative environment” and should gain within a year.

The Bank of America analysts added that the gains could be much more sizable if the winner of Brazil’s presidential election on October 26 suggests changes in energy policy.

The analysts have a buy rating on Petrobras and said “There should still be important upside over the next six to 12 months from current depressed levels under either scenario … If election results suggest substantive energy policy change, we would expect a major stock recovery.”

The analysts also said that Petrobras is poised to benefit in the coming months as production increases alongside refining capacity, which is likely to drive improved financial results.

“Operational trends are likely to be more positive over the next 12 months, with a sharp rise in production and greater refining capacity likely to contribute to sharply lower imports,” they said. “Positive trends in cash generation should become more evident.”

 Source: Bloomberg