Gran Tierra Energy Inc. (NYSEMKT:GTE) Upgraded By TD Securities
Gran Tierra Energy Inc. (NYSEMKT:GTE) which is a Canada based oil and gas producer with a market cap of $2.1 billion got upgraded by trading house TD Securities analysts yesterday. The recommendation of a Buy on the stock from its previous recommendation of Hold sent the investor community into a tizzy, resulting in a 5 percent increase in the stock valuation, over its previous day close. The bull run on the stock was even more pronounced this time, since the price target also was upped by nearly 10 percent to breach the psychological barrier of CAD $10.5, from its previous recommendation of CAD $9.5. The new P.T represents a nearly 30 percent premium over the stock’s valuation before the ratings upgrade triggered the stock rally.
Analysts At TD Securities Are Hung Over This Stock
TD Securities senior analyst Jamie Somerville in his note to his clients has explained the reasons for his bullishness about the oil company’s prospects over the near and midterm time frame. He has highlighted macro economic factors including the favourable exchange rate as contributing factors for this positive build up and has been quoted to have said that, “A reduction in the spot U.S. dollar/Canadian dollar exchange rate assumption we are using to $0.90 (from $0.97) is the main reason for an average ~8% increase in our Canadian dollar NAVPS estimates for International E&Ps and a similar increase in our NAVPS-derived target prices. Since this increases our implied return to target to 32%, we are increasing our rating to BUY from Hold.”
Stock Has Displayed Resilience
Another key factor that has influenced the analysts at TD Securities to up the ratings on this small capped oil and gas is the resilience the stock has shown in not being impacted adversely by any external factors which are not directly related to its day to day operations. The case in point, as pointed out by Jaime, is that relative solidity that the stock displayed in its evaluation, even at those testing times when the agency itself had downgraded the stock in October last year.
Comparatively Cheaper To Competition
They aver that since those times, when the company stock was perceived to be overvalued in comparison to its peers is now drastically changed, since its very peers with relatively lower operational efficiencies, are trading up by close to 30 to 50 percent at this juncture. This has promoted the rating agency to opine that the stock valuation of Gran Tierra Energy Inc. (NYSEMKT:GTE) is no longer overvalued.