Saudi Aramco Receives Upgrade on Wall Street as Jefferies Initiates Buy Rating

Investing.com — Saudi Aramco has garnered new attention on Wall Street as Jefferies has commenced coverage of the stock with a Buy rating, setting a price target of SAR 32 per share, which suggests a potential total shareholder return (TSR) of 24%.

In their analysis, Jefferies emphasizes Aramco’s distinctive advantages in the oil and gas industry, highlighting the company’s strong influence on oil markets, its low-cost structure, and its ability to provide an attractive dividend yield, projected to be 4.6% by 2025.

Jefferies considers Aramco as the leading upstream business in the sector. According to the analysts, “Whether we consider costs, asset longevity, or cash flow break-evens, Aramco possesses the best asset base in the industry.”

The company’s contribution of approximately 10% of global crude supply, along with its control of spare capacity equivalent to 3% of global demand, enables it to sway oil prices—a significant advantage, especially as the Saudi government aims to maximize revenue.

Despite uncertainties surrounding oil demand and OPEC+ policies, Jefferies does not foresee a substantial rise in oil prices beyond $80 per barrel. Nonetheless, Aramco is poised to benefit from increased production capacity, with the potential to boost output by up to 1 million barrels per day in 2025. The analysts also observe that Aramco’s dividend policy is among the most generous in the industry, positioning the company well to sustain payouts even amid challenging macroeconomic conditions.

While Aramco’s market valuation is higher compared to its competitors, Jefferies contends this premium is merited, given the company’s superior returns and asset durability. “With approximately $55 billion in capital expenditures, Aramco can continue covering its regular dividend with oil prices down to around $70 per barrel,” they state, reinforcing the stock’s attractiveness for investors seeking stability within the oil and gas sector.