BP Shares Gain on Upgrade, But Underlying Concerns Linger

BP's (LON:BP.) stock rose over 2% on Tuesday following an upgrade by Morgan Stanley, yet a deeper examination reveals persistent anxieties surrounding the energy giant's strategic direction and market vulnerabilities.

The stock saw an initial upward movement after Morgan Stanley revised its rating to ‘Equal Weight' from ‘Underweight' on Tuesday, simultaneously increasing the price target to 400p from 347p.

This adjustment reflects a more neutral stance on BP's near-term prospects, driven by the perceived strength of its upstream oil and gas production.

The bank told investors in a note that BP's upstream portfolios remain in “rude health.”

Furthermore, the analyst suggests confidence in BP's ability to maintain, albeit modestly, oil and gas production growth towards 2030. The stock is currently up +11.1% Year-To-Date.

However, the optimism is tempered by reservations. Morgan Stanley remains cautious about the broader energy sector, emphasizing that its views are heavily influenced by oil and gas prices, with risks skewed to the downside.

This concern is particularly relevant given Morgan Stanley's own projections of Brent crude oil prices potentially declining to around $60 per barrel by early 2026.

The firm also indicated that BP's buyback programs could be at risk, a sentiment that could cause concern for investors seeking short-term returns.

This perspective contrasts sharply with Scotiabank's recent upgrade of BP to ‘Sector Outperform' with a $42 price target, fueled by the potential of the Bumerangue Block discovery to bolster BP's upstream business.

The Bumerangue block discovery has “single-handedly changed the longer-term trajectory” of BP's upstream portfolio, according to Scotiabank.

Morgan Stanley's downgrade of BP in May 2025 to ‘Underweight' concerns over BP's strategic balance between traditional and renewable energy sources, coupled with higher leverage compared to its peers.