On Tuesday, Equinor’s energy stock experienced a significant downturn, with its value plummeting by 4.83%. This decline wasn’t driven by company-specific news but rather by an analyst’s decision to lower the stock’s price target. By the close of the trading day, Equinor’s shares had fallen nearly 5%, a stark contrast to the S&P 500 index’s more modest 2.2% drop.
Adjustments Amidst Consistency
The reduction came from Christyan Malek, an analyst at JPMorgan Chase. Prior to the U.S. market’s opening, Malek decreased his price target for Equinor by 10 Norwegian kroner, equivalent to $9, setting it at 250 kroner ($24). Despite this adjustment, he retained his underweight (essentially a sell) recommendation for the energy stock.
Malek’s rationale for this change wasn’t immediately clear, but it wasn’t an isolated incident. Just days before, Martijn Rats, another analyst from Morgan Stanley, also adopted a more pessimistic view of Equinor’s prospects.
Rats not only lowered his target price from 305 kroner ($29) to 270 kroner ($25) but also downgraded his recommendation, shifting from an equal weight (hold) to an underweight stance.
Questioning the Dividend’s Value
Rats’ revised outlook largely centered on Equinor’s dividend strategy. In his latest research note, he highlighted that the company plans to incrementally increase its quarterly dividend by $0.02 each year, aiming for a payout of $1.90 per share by the decade’s end. However, his analysis suggested that the current value of Equinor’s anticipated future dividends is 6% less than its present level. This, according to Rats, aligns with his underweight rating.
