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Shares of Sunoco (NYSE:SUN) saw a change in market sentiment on Tuesday as Citi adjusted its stance on the energy company’s stock. The firm downgraded the stock from Buy to Neutral, setting a price target of $65.00.
The rating change comes after Sunoco shares gained 6% against the Alerian MLP Index (AMZ) following the announcement of its acquisition of NuStar Energy (NS).
Citi had previously upgraded Sunoco to Buy with the expectation that the company would exceed its growth target and achieve synergy levels expected from the NuStar deal. While these results are still expected, Sunoco stock’s recent performance has narrowed the valuation gap that existed following the announcement.
The market has widely recognized the benefits of accretion and synergy, with the primary concern being the potential dilution of incentive distribution rights (IDRs).
With the NuStar transaction still pending and without significant new data, Citi believes the risk-reward balance for Sunoco is now more balanced. The company notes that, with expected 2026 EBITDA of 8.1x, Sunoco’s valuation aligns with that of diversified peers, reflecting the value creation and transformative impact of the transaction.
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