Equinor ASA discussion
EQNR Jefferies Analysis for NOK 270 on EQNR is some garbage.Why?:
-Reaching optimal capital structure.
-High Dividends
-Oil price and high USDNOK
-1 year from now
-Reaching optimal capital structure.
EQNR currently has a net debt to capital employed at -22,9% and aims to keep it at 15-30%. To reach the lower end of this target they need to pay out an additional 15 billion dollars.
finansavisen.no/finans/2023/11/24/8058431/equinor-opp-eller-ned
-High dividends
EQNR currently pays a dividend of 0,9 USD each quarter. (3,6 USD anually).
-Oil Price and High USDNOK
Oil price is currently at a good level with potential to reach even higher levels. The USDNOK is high which makes earnings in NOK greater.
-1 Year from now
Jefferies put a price target at 270. OK, lets put the price at 270 now.
First, lets get to optimal capital structure and pay out 15 billion USD. That is 5,17 USD per share. Using an exchange rate of USDNOK 10,5 it amounts to about NOK 54 per share. So from 270, we're now at 216 in the LOWER end of optimal capital structure.
So, now add in 1 year of dividends. 3,6 USD per share, with USDNOK at 10,5, it will be NOK 37,8.
Now we're at NOK 178 per share.
They also have a big share buyback programme, so this just adds on top.
178 NOK per share? This is just in one year and with low expectations. If the world has not gone to shit by then EQNR has had another year of high earnings.
Jefferies set this price target on the background of a normalisation of gas prices in 2025.
Looking at historical prices for EQNR we're already at the same prices (way lower than peaks) with much lower oil prices and way lower USDNOK.
There is potential for prices to stay at the same place (which is more than good enough) for a long time and possibly go way higher.
Jefferies is in my opinion way off in their price target for EQNR. With the dividends and buybacks, and looking at historical prices for EQNR, price targets of NOK 440 makes more sense than ever.
EQNR Value Score 79, and undervalue 1%, Expected return is 10%, buy price $20. Wait for pullback on SMA 200 around $15-20
