Normally, when an analyst cuts a rating, it reflects badly on the stock in question. But for oil stock Sunoco (NYSE:SUN), it didn’t do much damage at all. In fact, Sunoco actually gained fractionally after the downgrade, and it was likely the reason why the cut was issued that made it hurt less.
The downgrade came from Citi, where analyst Spiro Dounis pared back Sunoco’s rating from Buy to Neutral after a deal with NuStar was announced. Since SUN shares rallied after the announcement, the value of the NuStar deal is now largely priced in, which meant the Buy recommendation had to go.
The NuStar deal gives Sunoco access to a major refined products transporter that serves a large portion of the Midwestern United States, giving Sunoco much better access to the region.
Not the Only Recent Move, Either
Meanwhile, Sunoco also recently took the opportunity to improve its cash holdings by getting rid of some extra businesses. Just days ago, Sunoco revealed it was selling off its West Texas Stripes locations, as well as its Laredo Taco Company outlets. That will ultimately give buyer 7-Eleven Inc. 204 new locations throughout West Texas, Oklahoma, and New Mexico.
Sunoco first picked up the Stripes line back in 2015 but has now decided to sell out to lower its leverage—it’ll land an even billion dollars for the sale—and set aside capital for future growth.
Is Sunoco a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SUN stock based on three Buys and four Holds assigned in the past three months, as indicated by the graphic below. After a 43.95% rally in its share price over the past year, the average SUN price target of $60.71 per share implies 0.69% downside risk.
