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- Shares of Petroleo Brasileiro SA Petrobras (ADR) (NYSE: PBR) have declined 50.87 percent over the past six months, down to a low of $2.93 on January 25.
- J.P. Morgan’s Marcos M. Severine has downgraded the rating on the company from Neutral to Underweight.
- Severine believes that despite management having taken “necessary and adequate” steps to resolve the financial challenges facing the company, Petrobas’ challenges remain.
Analyst Marcos Severine explained that the current sentiment on the stock was similar to the memorable boxing match between Sugar Ray Leonard and Roberto Durán II on November 25, 1980, when the latter threw in the towel at the end of the eight rounds, saying “No más, no más. No more box.”
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“The never-seen combination of macro conditions – very low Brent prices and sizeable FX devaluation – followed by limited access to the debt market turns the investment riskier,” Severine noted, which was why he too was saying “No Más” to the stock.
According to the J.P. Morgan report, Petrobas would reach an estimated cash level of US$74 billion by 2020, which means that the company would need new money to roll over its debts payable during 2016-2019.
However, Petrobas is facing ongoing constraints related to access to the debt market following the stock being downgraded to junk status. “We believe PBR will have to announce additional measures to curb further its cash needs in 2016-19,” Severine said.
Severine believes that the company was unlikely to pay dividends for 2015 in order to preserve cash.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.