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Jefferies Sees Buying Opportunities in 'Oversold' European Energy Stocks
Summary
According to investment bank Jefferies, a sharp divergence in European energy stocks since the start of the Iran conflict has created buying opportunities in large-cap names whose fundamentals remain strong despite lagging share prices.
A significant divergence has emerged among European energy stocks since the escalation of the Iran conflict in late February, creating selective buying opportunities in companies that appear oversold, according to a new analysis from Jefferies.
The investment bank said the sector's performance shows a clear divide, with investors rewarding companies seen as direct beneficiaries of stronger commodity prices while other fundamentally sound firms have lagged.
A Tale of Two Sectors
Jefferies noted that some companies have seen their valuations rise in line with improving earnings prospects driven by the geopolitical environment. The firm highlighted several outperformers since the conflict began:
- Neste Oyj has rallied 33%, benefiting from stronger diesel prices and supportive renewable fuel regulations.
- Repsol gained 17%, with Jefferies citing the potential for an upgraded share buyback program.
- Equinor ASA climbed 13%, supported by firmer European natural gas prices.
- In the exploration and production (E&P) space, Vår Energi rose 15% on expectations of extraordinary dividends.
'Oversold' Opportunities Identified
AdIn contrast, the brokerage argued that several heavyweight energy companies have been unfairly punished and now represent attractive investment cases. Jefferies identified Shell PLC and TotalEnergies SE as preferred "oversold" opportunities among the integrated majors, citing Shell's extended reserve life and TotalEnergies' risk-mitigating diversified portfolio.
Within the E&P sub-sector, Jefferies pointed to Serica Energy, Harbour Energy, and Kosmos Energy as oversold. The bank noted these firms have improving balance sheets, stronger liquidity, and are making progress on key strategic projects.
Outlook for Oilfield Services
Jefferies also flagged opportunities among oilfield service companies, where firms like Maire, Technip Energies, and TechnipFMC have underperformed. The analysis suggests these companies have limited direct disruption from the Middle East conflict and maintain healthy order pipelines.
The bank argued that this group could see a significant upside if regional reconstruction spending accelerates once geopolitical tensions eventually ease. The broad dispersion in stock performance, Jefferies concluded, has created a market where certain companies trade at an unwarranted discount.