Jefferies Sees Buying Opportunities in 'Oversold' European Energy Stocks

A recent conflict involving Iran has created a sharp divergence in the performance of European energy stocks, with several large-cap companies now trading at a discount to their fundamental value, according to analysts at Jefferies.

A Widening Performance Gap

In a recent research note, the investment bank said that since the conflict began in late February, investors have rewarded companies perceived as direct beneficiaries of stronger oil and gas prices. This has created what Jefferies describes as a growing divide between stocks with justified gains and those that appear oversold despite having limited operational exposure to the conflict.

The analysis suggests the market is debating which companies deserve to trade at a geopolitical premium, creating selective buying opportunities among those that have been unfairly left behind.

Sector Outperformers

Jefferies highlighted several companies that have rallied significantly, with their gains supported by improving earnings prospects. Key performers since late February include:

Ad

• Neste Oyj (+33%): Rallied on the back of stronger diesel prices and supportive renewable fuel regulations.
• Repsol (+17%): Benefited from the prospect of an upgraded share buyback program and improving opportunities in Venezuela.
• Equinor ASA (+13%): Climbed due to firmer European gas prices and a clearer strategic outlook.
• Vår Energi (+15%): Supported by expectations for extraordinary dividends and long-term production growth.

Jefferies Flags 'Oversold' Opportunities

In contrast, the brokerage argued that several heavyweight energy names have lagged and now present potential opportunities. Among integrated oil companies, Jefferies identified Shell PLC and TotalEnergies SE as oversold, noting Shell's strengthening investment case for its Canada LNG project and TotalEnergies' risk-mitigating diversified portfolio.

Within the exploration and production (E&P) space, the bank said stocks including Serica Energy, Harbour Energy, and Kosmos Energy now look undervalued given their improving balance sheets and stronger liquidity.

The report also pointed to underperformance among oilfield service companies like Maire, Technip Energies, and TechnipFMC. Jefferies argued these firms have healthy order pipelines and could benefit from regional reconstruction spending once geopolitical tensions ease.