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Spread betting BP over the long term PDF Print E-mail
Written by Roberta Murray   
Thursday, 28 April 2011 10:46

This morning Jefferies the investment bank provide guidance on BP Plc.


Here at Spread Betting we like to use broker analysis and recommendations to formulate long term spread betting strategies.

The idea is to leverage the expertise, time and effort that analysts put into their equity research and use the price target as a potential take profit level.

However, before opening a spread betting position a technical look at the charts is also advised, the more research and planning the better.

So, with regards to BP, we see that Jefferies have set a price target of 500p, and they have reiterated their Buy call:

"At our 500p price target, we estimate BP would trade at a 2011 PER of 5.9x versus 8.8x for the global integrated sector.

"The key valuation risk remains the final outcome of the Macondo spill cost, where we have a range of US$17-36bn (net, after tax). The upper end of this range implies BP is found to be grossly negligent for the accident."

Yesterday the oil major announced 1Q 2011 earnings.

Analysts say they were essentially in line after adjusting for the recent UK tax increase, although divisionally they were mixed, with upstream missing due to higher costs, while downstream beat, aided by strong margins and good trading conditions.

Jefferies say:

"Regarding Macondo, we think the flurry of lawsuits at the end of last week could signal a longer process than we had anticipated to reach an agreed resolution of the spill cost.

"BP reported 1Q 11 clean net income of $5.37bn, a fall of 5% YoY, which missed consensus by 4%. However, all of the miss was below the operating line, as clean RCOP was $9.04bn, a 1% beat of consensus and also a 1% improvement on 1Q 10. The main reason for the miss was a higher effective tax rate than expected of 37% versus consensus of 34%, which was mainly due to the recent UK tax increase."
 

Spread Betting Lessons - Cut out the emotion!



Oh, and also a lesson why the Stop Loss is your Friend !