On Wednesday, Galp Energia SGPS SA (OTC:GLPEY) (GALP:LI) (OTC: GLPEF) received an upgrade from RBC Capital from Sector Perform to Outperform. The firm also increased the price target for the company's shares to €25.00, a significant rise from the previous target of €17.00.
The upgrade was prompted by Galp Energia's substantial oil discovery in Namibia, which is considered a game-changer for the company's size and investment profile. The discovery's impact is seen as potentially pivotal, given the rarity of significant oil finds in recent years and the concentrated nature of Galp's asset portfolio.
RBC Capital noted that following the initial positive reaction to the news, investors might wonder about the company's prospects. Despite an anticipated slowdown in news flow, the firm believes that the industry's limited number of quality oil discoveries and Galp's focused portfolio position it as an attractive candidate for acquisition by a larger entity in the future.
The analyst from RBC Capital predicts a shift in investor focus from near-term free cash flow and total shareholder return to the long-term value of the company's resources. This outlook underpins the decision to upgrade the stock to Outperform and set a higher price target of €25.00.
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