Morgan Stanley analyst Martijn Rats upgraded TotalEnergies (TTE) to Overweight from Equal Weight with an unchanged price target of $60.80. The firm adjusted ratings in the European energy group, saying the sector’s “fortunes remain closely tied to oil markets.” Morgan Stanley expects oil to enter a “meaningful surplus” after the summer. As such, it foresees downside risk to earnings and buybacks, upside risk to net debt, and does not find valuations compelling at current share levels. The firm took its industry view back to “Cautious.” However, TotalEnergies is more integrated along the value chain, which tends to lead to lower earnings volatility during periods of oil price weakness, contends Morgan Stanley. The firm swapped Equinor for TotalEnergies as its second Overweight-rated stock.
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