Saudi Aramco Gains Wall Street Support

Investing.com — Saudi Aramco has attracted a new ally on Wall Street, as Jefferies has initiated coverage of the stock with a Buy rating and a price target of SAR 32 per share, suggesting a 24% total shareholder return (TSR).

In a recent note, Jefferies emphasized Aramco’s distinct advantage in the oil and gas sector, highlighting its strong impact on oil markets, low-cost structure, and capacity to sustain an attractive dividend yield projected at 4.6% in 2025.

Jefferies considers Saudi Aramco (TADAWUL:2222) as the leading upstream business in the industry. The analysts state, “Whether we look at costs, asset longevity, or cash flow break-evens, ARAMCO has the best asset base in the sector.”

With the company producing about 10% of global crude supply and controlling additional spare capacity equivalent to 3% of global demand, it retains substantial influence over oil prices, a crucial edge as the Saudi government aims to maximize revenue.

In spite of prevailing uncertainties surrounding oil demand and OPEC+ strategies, Jefferies does not foresee significant upside beyond $80 per barrel for oil prices.

Nevertheless, Aramco could benefit from increased volumes, with the potential to ramp up output by up to 1 million barrels per day by 2025. The analysts also highlighted that Aramco boasts one of the most generous dividend policies in the industry, positioning the company to maintain payouts even under challenging macro conditions.

Despite trading at a premium compared to its peers, Jefferies claims this is justified by Aramco’s superior returns and asset durability.

“At ~$55bn capex, ARAMCO will be able to cover its ordinary dividend down to a ~$70/bbl oil price,” they remarked, emphasizing the stock’s appeal for investors looking for stability in the oil and gas sector.