Why is Jefferies bullish on the Ampol (ASX:ALD) share price?

We take a look at what one broker has to say about the petroleum giant's stock

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Ampol Limited (ASX: ALD) share price is inching higher today, up 0.86% to $28.08 at the time of writing.

It's been a difficult period for the petroleum giant these past 3 months, with shares trading as high as $31.95 in November before retracing backward to their current levels.

Add in that shares are trending in a sideways channel over the last 12 months, and the recipe is becoming more and more flavourless for Ampol shareholders.

So with these points in mind, we ask, is Ampol a buy? Let's take a closer look at what the experts are saying.

Concept image of a businessman riding a bull on an upwards arrow.

Image source: Getty Images

What's Jefferies saying about Ampol?

The team at investment bank Jefferies notes that Viva Energy Group Ltd (ASX: VEA)'s recent upgrade to earnings guidance bodes well for Ampol.

Jefferies points out that Ampol is Viva's major competitor in the Australian petroleum refining and marketing segment. As a result, any upgrade to Viva's earnings outlook transposes as a positive catalyst to Ampol.

In a recent note, Viva advised it expects earnings before interest, taxes, depreciation, and amortisation (EBITDA) to come in at $470 million to $490 million in 2021, which is a substantial jump of almost 20% from median Jefferies forecasts.

The broker notes that Viva's upgrade was likely due to margin performance at the refining and retail segments. While it acknowledges that "Viva is likely outperforming in both commercial and retail", it concurrently believes "these dynamics augur in well for Ampol".

Jefferies says it "remains positive on both stocks given leverage to COVID recovery and attractive valuations". For reference, Ampol is currently trading at 14.6x price to earnings (P/E) and just under 2.3x price to book (P/B).

The team at Barrenjoey Capital Markets recently upgraded its rating on Ampol as well, recommending it as overweight with a $36.68 valuation.

This sentiment appears to be shared with the majority of analysts covering Ampol, according to Bloomberg Intelligence.

From the list of analysts covering Ampol almost 60% reckon it is a buy right now, with a consensus price target of $33.74. This consensus valuation offers a 12-month return potential of around 20% from the current market price.

What are other analysts saying about the Ampol share price?

With respect to some specific valuations, Credit Suisse has Ampol as neutral at a price target of $29.53, whereas Morgan Stanley likes the shares and rates Ampol as a buy at a $35 per share valuation.

RBC Capital Markets holds the same view and rates Ampol a buy with a $33 per share price target. In contrast, Barclay Pearce isn't as rosy and reckons the company is a hold at $24.91 per share.

The number of analysts covering Ampol and rating it a buy has crept down gradually over the last 12 months.

This downward move has occurred alongside the Ampol share price, which has also slipped around 1.5% into the red in that same time.

The author has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

Business man marking Sell on board and underlining it
Broker Notes

Why experts are selling these 3 ASX shares this week

These shares have been given sell ratings. But why?

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Broker Notes

Buy, hold, sell: ResMed, Sigma, and TechnologyOne shares

Are analysts bullish on these popular stocks? Let's see what they are saying this week.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to buy these shares.

Read more »

Red sell button on an Apple keyboard.
Broker Notes

Sell alert! Why this expert is calling time on Technology One shares

A leading analyst foresees growing headwinds for Technology One shares.

Read more »

A man in his 30s with a clipped beard sits at his laptop on a desk with one finger to the side of his face and his chin resting on his thumb as he looks concerned while staring at his computer screen.
Broker Notes

Buy, hold, sell: James Hardie, NextDC, and WiseTech shares

Analysts have given their verdict on these popular shares this week.

Read more »

A woman holds her finger to the side of her face and looks upwards as she thinks about something.
Broker Notes

Buy, hold, sell: Catapult Sports, Worley, CBA shares

ASX 200 shares deteriorated last week and are in the red for 2026 to date.

Read more »

Smiling business woman calculates tax at desk in office.
Broker Notes

Could Xero shares really go that high? 3 brokers weigh in

If you ask the analysts, this share has been heavily oversold.

Read more »

A businessman lights up the fifth star in a lineup, indicating positive share price for a top performer
Broker Notes

Bell Potter names more of the best ASX shares to buy in May

The broker reckons these shares could be among the best to buy this month.

Read more »