BP Shares: RBC Capital Cuts Stock as Balance Sheet ‘Should Be Healthier’

BP (LON: BP.) was downgraded from Outperform to Sector Perform by RBC Capital in a note this week, with the investment bank also reducing its price target for the stock from 650p to 550p.

Despite BP's recent efforts to enhance returns and explore new growth engines, RBC notes that the company's shares have lagged behind its peers. This underperformance has been noticeable both in the short term and over an extended period.

“Despite the recent focus on returns and new growth engines, BP's shares have underperformed the peer group and over a longer-term horizon have materially lagged the sector,” wrote RBC.

The firm also states that while the shares continue to screen as attractive, the BP balance sheet “should be healthier than it is at this point in the cycle.”

Additionally, BP's distributions are seen as less resilient compared to its competitors, raising concerns among investors.

Another key risk highlighted by RBC Capital is the potential risk associated with BP's new growth ventures.

These initiatives, which are crucial for the company's future development, may not deliver the anticipated results, according to the bank. This uncertainty adds another layer of risk for investors considering BP's stock.

Overall, RBC Capital's downgrade reflects concerns over BP's current financial condition and the potential pitfalls of its strategic growth plans. Investors are advised to approach BP's stock with caution, given these highlighted risks and the company's historical performance issues.

BP shares are down around 1.8% at the open on Thursday.