HSBC upgrades BP stock rating on improved deleveraging outlook

HSBC has upgraded BP Plc's stock rating from Hold to Buy, increasing its price target to GBP6.40 from GBP5.70. Analysts believe BP is undervalued, with price targets ranging from $41 to $64. The company's strong balance sheet, featuring a debt-to-equity ratio of 1.24, suggests it could benefit from higher commodity prices. HSBC expects BP to face less pressure to sell assets to reduce liabilities, as deleveraging will not primarily involve divestments.

The firm previously noted that BP would need to exceed $3 billion in annual asset disposals to meet its deleveraging goals at $65 per barrel Brent, but this has changed at $85 per barrel. A higher oil price environment could lead to increased proceeds from sales, particularly for BP's upstream assets, potentially boosting future growth.

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