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In a recent Reddit post, user SunsetKittens shares insights on why Petrobras Brasileiro (NYSE:PBR) stock presents a compelling investment opportunity. Known for previous successful stock picks like United States Steel (NYSE:X) and Teledyne Technologies (NYSE:TDY), SunsetKittens now focuses on Petrobras, a state-owned oil company in Brazil.
The iShares Inc iShares MSCI Brazil ETF (NYSE:EWZ) offers exposure to Brazil equity markets. Petrobras stock holds second place in EWZ in terms of allocation, at 9.36% of the portfolio.
SunsetKittens points out that Petrobras is currently trading at around $15.50, offering a market cap of over $100 billion. With strong financial metrics, including $4.80 per share in free cash flow in 2023 and a break-even oil price of $20 per barrel, Petrobras appears undervalued in the market.
Also Read: Petrobras Reportedly Pulls Back On Dividends
Despite a decrease in dividend yield, SunsetKittens sees potential for future growth, although acknowledges uncertainty regarding government policies under President Lula Da Silva‘s administration. Lula’s focus on green energy initiatives raises questions about potential interference in Petrobras’ operations, reminiscent of similar concerns faced by other companies like Meta Platforms in 2023.
“Now like Zuck chasing the Metaverse Lula will be chasing green energy a tad. But will he kill the golden goose that funds his government?” Sunsetkittens said.
However, SunsetKittens remains optimistic, drawing parallels between Petrobras and successful investments like Meta. With only 30% of its oil sold internationally, Petrobras benefits from domestic price controls, ensuring stable profits even amid global market fluctuations.
Responses from fellow Redditors offer mixed opinions, reflecting ongoing debates within the investment community. While some highlight risks associated with government intervention and market volatility, others see Petrobras as an attractive long-term investment opportunity, especially considering its strong position in the oil market.
Petrobras offers a unique value proposition for investors willing to navigate potential risks. As the debate continues, it remains to be seen whether Petrobras will maintain its status as a lucrative investment or face challenges under changing government policies.
Photo: Shutterstock
