On Wednesday, UBS analyst Tasso Vasconcellos adjusted the outlook for YPF S.A. (NYSE:YPF), raising the price target to $38 from the previous $30 while simultaneously downgrading the stock from Buy to Neutral.
The revision comes as YPF's shares, currently trading at $40.15, sit near their 52-week high of $42.30. According to InvestingPro data, the stock's RSI indicates overbought territory, supporting the analyst's view of limited upside potential.
YPF S.A.'s stock soared approximately 275% following the election of President Milei in Argentina, outpacing the S&P 500's 30-35% gain during the same period. Additionally, YPF's year-to-date increase is around 145%, compared to the S&P 500's 25% rise.
UBS acknowledges the company's strong performance and the effective execution by its current management, which has positioned YPF as a robust private player with potential for further mid to long-term growth.
Despite the optimistic outlook for YPF, UBS points out that the company is currently trading at around 4.0x its estimated 2025 enterprise value to EBITDA (EV/EBITDA), which represents a substantial premium over its historical average of closer to 3.0x. The current EV/EBITDA ratio stands at 6.29x, based on the last twelve months' EBITDA of $3.89 billion.
Looking ahead to 2026, the firm's estimates suggest that YPF will trade at approximately 3.0x EV/EBITDA, assuming significant EBITDA growth of around 30% in 2026 compared to 2025, and about 50% in 2026 versus 2024. According to InvestingPro's Fair Value analysis, the stock appears overvalued at current levels.
In conclusion, while UBS continues to appreciate YPF's trajectory and the strides it has made under its current leadership, the firm's assessment implies that the market has already factored in the expected improvements in the company's performance for the coming years.
This assessment has led to the decision to downgrade the stock to Neutral despite the price target increase, reflecting a more cautious stance on the stock's near-term growth prospects.
For a deeper understanding of YPF's valuation and growth potential, InvestingPro subscribers can access 12 additional ProTips and a comprehensive Pro Research Report that provides detailed analysis of the company's fundamentals and future prospects.
In other recent news, YPF S.A., the Argentine energy company, reported significant growth in its Q3 2024 financial results. Earnings before interest, taxes, depreciation, and amortization (EBITDA) rose by 47% year-on-year to nearly $1.4 billion, while net income almost tripled from the previous quarter to around $1.5 billion.
Revenues reached $5.3 billion, marking a 7% sequential and 18% year-on-year increase. Despite a 9% year-over-year decline in overall fuel sales volumes, the company's shale oil production increased by 36%, accounting for nearly half of the total output.
YPF also disclosed strategic investments of $1.4 billion, primarily focused on upstream shale oil activities. The company issued a $540 million international bond, maintaining effective liquidity management. However, it noted a negative free cash flow of $173 million, influenced by higher debt servicing and crude oil purchases.
In the light of these developments, Citi downgraded YPF S.A. shares from Buy to Neutral, adjusting the price target to $66 from the previous $88, following a reassessment of Argentina's credit default swap spread and the average cost of debt. Despite an increase in the target price for YPF to $44 per American Depositary Receipt from $33, the stock was downgraded due to limited potential for share price growth.
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