CA - Petrobras: It's Hard To Be Bullish Now
2024-05-28 04:41:52 ET
Summary
- For many months, Petrobras stock traded at a significant discount due to the substantial risk posed by its location in an opaque economic zone, despite its high-quality assets.
- Recent events (such as the firing of now-former CEO Jean Paul Prates about 2 weeks ago) have increased these risks further, in my opinion.
- I understand the bulls' argument that Petrobras stock looks cheap, as my comps valuation calculations show - the upside potential could be more than 50% if we disregard political risks.
- However, I see no reason to neglect these risks today. The discount to Petrobras' valuation is likely to remain the same or even widen.
- In light of these points, I think it's prudent to wait for lower prices for Petrobras stock or avoid it altogether, given the significantly increased risks. My rating is "Hold".