Downside risk is building up.
“Although fundamentals have developed positively over the summer, we believe its time to downgrade our general sector view to Neutral (Buy),” investment bank Sparebank1 Markets analyst Tore A. Tønseth wrote in an update distributed to customers Sunday night.
“We continue to be bullish on 2020-21 prices, but with the seafood stocks outperforming the market (OSEBX) with 18% past three months, and short-term price going in the completely different direction, we believe a downside risk in the sector is building up. We stick with our NOK 61.5/kg in 2020, and 2021 is now seen NOK 62.0/kg (+0.5/kg), but we cut our 2019 price forecast to NOK 58.0/kg, down NOK 3.0/kg.”
“Price pressure in EU is significantly higher than we expected some weeks ago, and with spot prices dropping to low NOK 40s for the next week, current price development going into the fall is nowhere near of reaching current expectations”, Tønseth wrote.
“We have adjusted our targets slightly to reflect the more positive long-term outlook, but with strong share performance both MOWI and SALM have reached our previous targets, and consequently downgraded to Neutral (Buy). We maintain Buy recommendations for LSG, AUSS, NRS and GSF, but investors should be aware of the short-term risk that now lies in the sector.”