After the stock price doubled during the year, Valero Energy (VLO.US) and Marathon Crude Oil (MPC.US) were downgraded by Jefferies: the valuation is already too high

The Zhitong Finance App learned that Jeffrey downgraded the ratings of refiners Valero Energy (VLO.US) and Marathon Crude Oil (MPC.US) from “buy” to “hold”. The target prices are 401 US dollars and 413 US dollars, respectively, saying that after the stock prices of these two companies have more than doubled in the past year, the valuations seem too high.

Jefferies analysts led by Lloyd Byrne said in the report: “There is no clear solution to tight refining fundamentals... what factors could disrupt the current cycle? We believe that the price of refined oil products needs to rise further and remain high to stimulate demand damage, otherwise government intervention may be necessary.”

The analyst wrote, “Investors are concerned that the US may implement a ban on the export of refined oil products before the midterm elections, and there is growing political support for this ban. Although this will be detrimental to global stability and will have an economic impact on the US, given that global powers are paying more and more attention to national interests, the US is likely to follow suit.”

Byrne believes that refiners' risk-return supports holding existing positions while waiting for market fluctuations to bring more opportunities to increase their holdings; even if forward prices remain high until 2029, current stock prices still implied that profit margins in mid-2030 were close to 2025 levels.

By the close of the US stock market on Tuesday, Valero Energy closed down 4.10% to $377.14, and is still up 135% so far this year; Marathon crude oil closed down 3.16% to $389.68, and is still up 142% so far this year.