TotalEnergies SE Shares Rise After RBC Upgrade

Shares of TotalEnergies SE (EPA:TTEF) increased following an upgrade from RBC Capital Markets, which raised its rating from "sector perform" to "outperform".

The revised outlook is based on several factors, including a reassessment of the company’s valuation, strategic positioning, and long-term growth prospects.

TotalEnergies had experienced underperformance, lagging over 15% behind its peers since summer. This downturn resulted from macroeconomic and company-specific challenges, such as uncertainties in French politics, potential tax changes, and issues related to investments in Adani Green Energy (NS:ADNA) amid an ongoing investigation.

Despite these challenges, RBC observed that the market reaction has been disproportionate, with TotalEnergies’ market capitalization dropping by approximately $20 billion since early November. The analysts emphasized that the company’s fundamentals remain intact, backed by a credible growth trajectory and a leading integrated power strategy.

Currently, TotalEnergies is heavily investing in growth projects, impacting near-term free cash flow yields. However, RBC argues that these investments will set the company up for future FCF growth as global gas prices recover, benefiting from its LNG and upstream operations.

The company trades at a modest premium compared to its European peers, a key factor behind the upgrade. RBC justified this premium by TotalEnergies’ potential to deliver robust total shareholder returns in 2025, estimated at 12.7%, the highest among its peers. Unlike some competitors expected to scale back buybacks, TotalEnergies’ execution on shareholder-friendly policies could enhance its attractiveness to investors.

TotalEnergies' "clean-firm power" strategy is viewed as a competitive advantage. The company aims to integrate renewables into its portfolio alongside traditional energy production, positioning itself uniquely to address the anticipated surge in global power demand. Although it has paused some U.S. offshore wind projects due to regulatory changes, RBC believes its broader renewable strategy aligns well with market trends.

The upgrade now includes a price target of €80, reflecting an upside from its recent trading levels around €54. Analysts noted that the near-term risks, including political uncertainties in France and execution challenges for key projects, are already factored into the stock’s current valuation, presenting opportunities for long-term investors.