Petrobras Shares Have More Than Doubled Since March; Barclays Expects Stock To Cool

Barclays analyst Paul Cheng sees Petroleo Brasileiro SA Petrobras (ADR) PBR share price ending a solid run higher after its Q1 earnings miss.

Shares have already risen more than 150 percent since March, and Cheng doesn’t foresee much in the way of news or data that would push them higher. Petrobas' asset sale program, designed to improve its problematic debt profile, is moving at a pace Cheng doubts will allow it to meet the company’s $14 billion 2016 target.

Despite the earnings miss, the analyst didn't see any surprises in the report and thinks the balance sheet can improve if oil moves higher.

Preferred Shares Recommended

Cheng views Petrobas as an interesting long-term idea, but cautioned investors the shares could trend lower in the near term due to its persistent debt problems and exposure to headline risk. Cheng added that between the two classes of shares, Barclays believes the preferred to offer more potential upside and better value. The analyst pointed out that once Petrobas reinstates its dividends, the preferred shares are likely to receive a significantly higher payout as far out as 2020.

Cheng maintained an Equal-weight rating.

Petrobas shares closed up nearly 4 percent at $7.15.