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Petrobras (NYSE:PBR) +1% in Thursday's trading despite receiving a downgrade by Citi to Neutral from Buy with a $14 price target, cut from $19, after the stock has surged 45% so far this year.
Given the new Brazil administration's view on price policy, dividends and investments, "our skepticism regarding the continuity of the ongoing and so-far successful strategy of the company... has risen," Citi's Gabriel Barra wrote.
The downgrade is the third in the past week for Petrobras (PBR), following moves by analysts at J.P. Morgan and HSBC on worries that the state-run company's new fuel-pricing policy, combined with the risk of a pickup in investment plans, will send debt levels soaring.
"The combination of a higher capex with lower return would erase a material part of PBR's value in the medium to longer term," Citi's Barra noted.
The next important trigger for the stock is the new investment plan, which Barra believes will point to $20B-$30B additional capital spending, pushing the total five-year plan to $110B-$120B - "not enough to change the investment thesis but... material enough to impact the dividend payment in the following years."
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