Petroleo Brasileiro SA Petrobras (ADR) (PBR) Stock Update

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Is the current surge in Petroleo Brasilerio SA Petrobras (ADR) stock, an opportunity for investors to sell off company’s shares

Brazil based energy company, Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) has done wonders in last one month’s time as the company’s stock gained almost 77% of market value while Dow Jones Index and S&P 500 Index were only up by 7.75% and 8.43% respectively. Although, Petroleo Brasilerio SA Petrobras stock started the year with a downward trend and underperformed the market in the first month of the year with high margin.

Although, one month’s tremendous surge in the stock has cover up the previous loss in the market value but research analysts are taking it as an opportunity to close off their positions in the company’s stock. As per Zacks Research, three analysts have rated the stock a sell, two analysts recommends a hold rating while none is of buy or strong buy opinion and has a $6.071 12-month consensus price target.

Petroleo Brasilerio SA Petrobras stock is currently trading at $5.53 up by 28.6% year to date (YTD) outperforming decline of 1.21% and 1.06% in Down Jones Index and S&P 500 Index respectively, as of pre-market hours on March 14. The company has a market capitalization of $34.76 billion with a total float of 7.44 shares and an average daily trading volume of 34.11 million. Petroleo Brasilerio SA Petrobras stock is trading in the 52 week range of $2.71-10.55.

The company has closed a loan deal with China Development Bank worth $10 billion. The repayment of the loan can be done through cash or oil as per the loan agreement signed. Moreover, the raised loan will be used in various drilling operations according to the company’s management. On one hand, this gave company chance to stabilize its outlook amid volatility in oil prices and a multi-billion corruption scandal. Conversely, the loan increases concerns of the investors as the company is already under heavy debt burden and the management was planning to divest its assets to repay loans worth $15.1 billion by the end of this year.

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Petroleo Brasilerio SA Petrobras’ credit rating was slashed by Moody’s in Brazil and Argentina due to current operational conditions. It’s Corporate Family Rating (CFR) and Senior Unsecured Debt rating was slashed to B3 from Ba3 and baseline credit assessment (BCA) was lowered to Caa3 from B3 by the agency. The credit rating agency is of the opinion that the volatility in crude oil prices will adversely affect the financial performance of the company in the near term. Moreover, in Moody’s view, Petroleo Brasilerio SA Petrobras has become prone to severe refinancing risks.

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