BRAZIL · BUSINESS

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.

The P-51 platform, the first built entirely in Brazil. Rising output from platforms like this one is the core of the bank’s case. (Photo: Divulgação Petrobras/Agência Brasil, CC BY 3.0 BR)

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.

What Petroleo Brasileiro Petrobras does. Petróleo Brasileiro S.A. – Petrobras explores, produces, and sells oil and gas in Brazil, China, the United States, the Americas, Asia, Europe, Singapore, and internationally. It operates through three segments: Exploration and Production; Refining, Transportation & Marketing; and Gas & Low Carbon Energies. The Exploration and Production segment explores, develops, and produces…

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.

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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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