(News Bulletin 247) – The bank lowered its opinion on the value, being cautious on gas prices in Europe as well as on the company’s cash generation.

Without falling however, TotalEnergies found itself a little under pressure this Wednesday. The oil major fell 1.7% to 62.5 euros around 3:30 p.m. and suffered the second most pronounced decline in the CAC 40.

The group led by Patrick Pouyanné is weighed down on the stock market by a downgrade on the part of Jefferies. The bank went from “buy” to “hold” on the stock while adjusting its price target to 65 euros compared to 69 euros previously.

>> Access our exclusive graphic analyses, and gain insight into the Trading Portfolio

Jefferies is cautious on gas prices in Europe, judging that the market is approaching an inflection point with normalization likely to occur in 2025.

Its forecasts therefore count on prices lower by 12% and 39% respectively for the years 2025 and 2026, compared to the prices implicitly integrated by the markets via futures contracts (“forward”).

However, according to the bank, TotalEnergies is the second major private major most exposed to spot prices for European gas, due in particular to its significant production in the North Sea. Due to this exposure and a technical factor (a lesser contribution from the gas price hedging program), Jefferies is much less optimistic than its colleagues about the group’s cash generation.

Towards a reduction in share buybacks?

Thus, its CFFO forecasts – cash flow from operating activities – are on average 11% lower than the consensus for the period 2024-2026.

In addition, Jefferies fears that TotalEnergies will reduce its quarterly share buybacks when it publishes its fourth quarter results (in February), going from $3 billion to $2 billion. This while the bank estimates that the French group is trading at a valuation premium compared to its comparables.

Outside of Jefferies, the independent research firm AlphaValue last week slightly raised its target on the value to 79.8 euros from 79.5 euros.

“The company’s energy transition strategy, focused on a strong and profitable electricity business, sets Total apart from its peers” and its liquefied natural gas (LNG) business is “well positioned to take advantage of increased demand and LNG trade, particularly in the second half of the decade”, judged the research office.