Neste Shares Rise After Goldman Sachs Upgrade to 'Buy' on Margin Outlook

Shares of Neste (HE:NESTE) rose 2.5% on Friday after analysts at Goldman Sachs upgraded the stock to 'Buy' from 'Neutral', citing an improved outlook for the renewable fuels market.

Goldman's Bullish Stance

In a note to clients, Goldman Sachs raised its 12-month price target for the Finnish refiner to €40 from a previous €32. The new target implies approximately 25% upside from the stock's current trading levels.

The investment bank highlighted that Neste has significantly underperformed its peers, lagging European refiners by 25 percentage points year-to-date and by 20 percentage points over the past month, creating a more attractive entry point.

Favorable Tailwinds Cited

Goldman Sachs attributed its upgraded view to several positive developments since July. Key factors supporting the more optimistic outlook include:

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• Geopolitical Risks: Increased supply disruption concerns, including Russia's diesel export ban, are creating a tighter market for refined products.
• Regulatory Support: The firm noted broadening regulatory backing for renewable fuels across Europe.
• US Market Clarity: The removal of an overhang related to small refinery exemptions in the United States has improved visibility.

Margin Strength to Offset Lower Volumes

While Goldman Sachs acknowledged that market expectations for Neste's 2027 renewable sales volumes have decreased, the bank believes stronger margins will more than compensate for the lower output. The firm's own volume forecasts remain about 5% below consensus.

However, due to the expectation of higher profitability, Goldman's 2027 EBITDA forecast is now approximately 30% above the market consensus. This conviction in margin strength is a central pillar of the bank's upgraded thesis.