On Friday, Mizuho Securities adjusted its stance on PBF Energy (NYSE:PBF), a player in the refining sector, moving its stock rating from Buy to Neutral. The firm also established a price target of $58.00 for the company's shares.
This shift comes as a result of reviewing the fourth quarter of 2023 performance updates for the refining industry, which has seen better-than-expected outcomes driven by demand optimism and potential short-term supply concerns.
The refining sector's recent performance has been buoyed by various factors such as delays in the Dangote refinery project and outages in Russian refineries.
Despite improvements in asset performance, margin capture, and cost control within the industry, the analyst noted that stock prices have surged beyond the gains in crack spreads. This observation is based on the data illustrated in Exhibit 8 of the report.
Mizuho's valuation methodology, which focuses on Net Asset Value (NAV), is grounded in long-term industry fundamentals rather than temporary market dislocations.
Following a comprehensive review, Mizuho has raised price targets by approximately 16% across the board for companies under its coverage. However, the anticipated upside from current market prices stands at a modest 2.4%.
The update from Mizuho indicates a cautious approach towards PBF Energy and other stocks in the refining sub-sector. The firm has also downgraded Valero Energy (NYSE: NYSE:VLO) to Neutral, while Delek US Holdings (NYSE: NYSE:DK) has been tagged as Underperform, signaling a more conservative outlook on these stocks amidst the current market dynamics.
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