Hold Rating for Neste Amid Earnings Concerns, Market Oversupply, and Regulatory Uncertainty

Analyst Jason Gabelman from TD Cowen maintained a Hold rating on Neste (NTOIY – Research Report) and keeping the price target at $8.00.

Jason Gabelman has given his Hold rating due to a combination of factors influencing Neste’s current and future performance. One of the primary concerns is the company’s recent earnings miss, attributed to increased downtime and elevated capital expenditure at its Rotterdam project, which has been delayed. Although Neste is implementing strategies to enhance its operations, the overall outlook is clouded by a projected market oversupply, which could exert downward pressure on margins. Additionally, the uncertainty surrounding regulatory frameworks and their potential impact on the industry has contributed to a cautious stance.
Another factor influencing the Hold rating is the complexity in forecasting Neste’s performance, given the limited financial disclosures and volatility in quarterly results. The company’s shift towards Renewable Fuels is aimed at cost reduction and asset optimization, yet it faces challenges due to the US government subsidizing domestic production, potentially disadvantaging international players like Neste. While there are potential upsides, such as European anti-dumping duties and new EU regulations, the near-term margin fluctuations and the need for more clarity on future financials justify a Hold recommendation at this time.