On Thursday, CFRA lowered its rating on OMV AG (OMV:AV) (OTC: OMVKY) stock from Hold to Sell, adjusting the price target to €40.00 from the previous €42.00.
The decision came after the analyst revised the earnings per share (EPS) forecast for the company, decreasing the 2024 EPS estimate to €7.10 from €7.70 and the 2025 projection to €7.20 from €7.50.
OMV recently communicated through an ad-hoc message the risk of supply disruptions due to the European court's potential impact on direct payments to its Russian gas supplier, Gazprom (MCX:GAZP).
The analyst highlighted the significant dependency OMV has on Russian gas imports, with Gazprom providing over 80% of Austria's gas during the 2023/2024 winter season.
The analyst expressed concern that an immediate halt in supply, as opposed to a gradual phase-out by the 2027/2028 winter, could force OMV to import more costly non-Russian liquefied natural gas (LNG). This change could substantially increase the company's costs and working capital requirements.
The downgrade reflects the analyst's view that OMV's current stock valuation does not adequately factor in the heightened geopolitical risk associated with the company's reliance on Russian gas supplies.
The analyst's assessment suggests that the market has not fully priced in the potential financial impact of these supply uncertainties on OMV's operations.
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