Brazil’s Petrobras Upgraded to Buy by Bradesco BBI, Which Sees a 25% Return by 2027
BRAZIL · BUSINESS
Key Facts
—What happened: Bradesco BBI upgraded state oil company Petrobras to buy after the shares’ recent fall made them cheap again.
—The number: The bank kept its target at R$53 (US$10.26) per share for end-2027, implying a 25% total return with dividends.
—The real story: Production at the state firm is growing about five times faster than at the global oil majors.
—The catch: The 25% return includes roughly 10 points of dividends, so the share price itself needs to climb far less.
—The discount: The stock trades at a 58% discount to global majors on projected 2027 earnings, the bank says.
—The risk: A deeper oil-price fall or a costly rescue of petrochemical firm Braskem could spoil the case.
Bradesco BBI, the investment-banking arm of one of Brazil’s biggest banks, has upgraded Petrobras from neutral to buy, arguing that the recent slide in the shares has opened a favorable trade: a 25 percent total return through 2027, powered by production growth few rivals can match.
What the upgrade actually says
Bradesco BBI raised its recommendation on the company’s preferred shares, traded in São Paulo under the ticker PETR4, from neutral to buy. The report came after a pullback in the shares, which had been dragged down by falling oil prices.
The bank kept its price target at R$53 (US$10.26) per share for the end of 2027. It did not change any of its estimates for the company.
Adding dividends to the price gain, the projected total return reaches 25 percent. Roughly 10 percentage points of that come from the payout alone.
For the company’s US-listed depositary receipts, known as ADRs, the target stays at US$20. An ADR is a certificate traded in New York that represents shares of a foreign company.
“The recent fall in the shares, pressured by lower oil, combined with production growth above expectations, made the risk-return relationship more favorable,” the bank wrote.
The asymmetry argument
The heart of the report is a claim about balance. Even in the bank’s most adverse scenario, the shares would still have room for a small gain of about 5 percent.
In the optimistic scenario, the upside reaches 57 percent. When the bad case is flat-to-positive and the good case is large, analysts call the setup asymmetric.
The production figures do the heavy lifting. Bradesco BBI estimates output grew on average 10.9 percent between 2025 and 2026, about five times the 2.2 percent expected from global oil majors.
For 2027, the bank projects total oil production of 2.82 million barrels a day. It believes the market will gradually lift its own estimates above 2.8 million.
Profitability backs the case too. The company’s return on invested capital is estimated at 13.7 percent, against an average of 6.6 percent among international competitors.
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A cheap stock, by the bank’s math
The valuation gap is the headline for value investors. The stock trades at a 58 percent discount to global majors when measured on projected 2027 earnings, the report says.
The estimated dividend yield, the annual payout as a share of the price, is 9.4 percent for the period. Integrated global oil companies are expected to pay 7.4 percent.
Part of the discount is structural, and the bank says so. The company is majority-controlled by the Brazilian state, and investors have long demanded a discount for political risk.
The bank’s verdict is that the discount has simply become too wide for the operating performance on offer. Growth and profitability, it argues, no longer justify it.
What could unlock the shares, and what could break the case
Bradesco BBI lists three possible triggers. Continued operating results above expectations, upward revisions to 2027 production and a readjustment of domestic fuel prices.
The fuel point matters politically. The state firm has sold gasoline and diesel below export-parity prices for a prolonged period, which suppresses refining revenue.
The risks are equally concrete. A steeper fall in oil is the obvious one, and the bank flags capital-allocation decisions as the quieter danger.
That includes a possible capital injection into Braskem, the troubled petrochemical company in which the oil producer is a major shareholder. Money spent there is money not paid out as dividends.
Even so, the bank argues the shares can beat global peers in a weaker oil market. Production growth and the valuation discount, it says, provide the cushion.
A U-turn, and a crowded bullish room
The upgrade reverses the bank’s own caution from February. Back then it cut the stock to neutral after a rally of more than 20 percent, calling the risk-reward less attractive.
Bradesco BBI now joins a bullish consensus. BTG Pactual raised Petrobras to buy earlier in the week with a target of US$21 per ADR, and broker XP carries a target of R$63 (US$12.20) per share.
The preferred shares are up about 56 percent in 2026, even after the recent slide. Foreign investors rotating into emerging markets have been a large part of that flow.
Between the two local share classes, the bank prefers the preferred PETR4. It sees no justification for the roughly 11 percent premium carried by the voting shares, PETR3.
Frequently Asked Questions
What did Bradesco BBI decide on Petrobras?
The bank upgraded the oil company’s preferred shares from neutral to buy, keeping a target of R$53 (US$10.26) per share for the end of 2027. Including dividends, it projects a 25 percent total return.
Why is the bank optimistic about the stock?
It cites production growth of 10.9 percent between 2025 and 2026, about five times the rate of global oil majors, plus a 58 percent valuation discount to those peers on 2027 earnings.
What is PETR4?
PETR4 is the ticker for the state oil company’s preferred shares on the São Paulo stock exchange, B3. Preferred shares carry no voting rights but have priority in dividend payments, and they are the most traded class.
What are the main risks to the buy case?
The bank names a deeper fall in oil prices and unfavorable capital-allocation decisions, including a possible capital injection into petrochemical maker Braskem, where the state firm is a major shareholder.
Do other banks agree with the upgrade?
Yes. BTG Pactual raised the shares to buy with a target of US$21 per US-listed receipt, and broker XP has a target of R$63 (US$12.20) per local share. The stock is up about 56 percent in 2026.
Connected Coverage
We covered the bond side of the company in Petrobras redeems global bonds, the Braskem entanglement in Braskem, Petrobras and the credit line and the halted export tax in Brazil’s court halts the oil export tax. More energy coverage sits in our Brazil business hub.
Sources: Money Times (28 August 2026), Estadão E-Investidor (29 August 2026), InfoMoney (3 February 2026), Investidor10 (25 August 2026), Suno (8 June 2026). Exchange rate: R$5.1639 per US dollar, open.er-api.com, 29 August 2026.
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