Last Update 19 Dec 25

Fair value Increased 1.57%

REP: Upstream Merger Talks And Refining Margins Will Shape Future Narrative

Analysts have nudged their blended price target for Repsol modestly higher to about EUR 16.45 from roughly EUR 16.20, reflecting slightly stronger long term revenue growth expectations, a marginally higher fair value estimate, and continued support from recent upward target revisions despite some caution on refining margins.

Analyst Commentary

Analyst views on Repsol remain mixed, with incremental target hikes balanced by growing concerns around the sustainability of current refining profitability and broader upstream strategy uncertainty.

Bullish analysts highlight that recent target increases toward the mid teens euro range reinforce confidence in Repsol's ability to execute on its strategic plan, support shareholder returns, and defend margins in a normalized commodity environment. At the same time, more cautious voices point to limited upside at current levels and the risk that sector headwinds could cap multiple expansion.

Discussions around potential portfolio moves, including a possible reverse merger of the upstream unit with a partner, are adding a layer of optionality to the investment case, but also underscore execution and valuation risks if terms or timing disappoint.

Bullish Takeaways

Recent price target increases around the EUR 16 mark are seen by bullish analysts as confirmation that Repsol's long term earnings and cash flow trajectory can support a slightly higher fair value than previously assumed.
The maintenance of positive or constructive ratings alongside target hikes suggests confidence that Repsol can navigate easing crack spreads via disciplined cost control, capital allocation, and a resilient integrated model.
Potential strategic actions involving the upstream portfolio are viewed as a source of upside optionality, with scope to crystallize value, simplify the structure, and improve the visibility of cash returns to shareholders.
Bullish analysts argue that, relative to some European peers, Repsol still offers an appealing balance of yield, growth projects, and exposure to commodity upside that could justify a re rating if macro conditions remain supportive.

Bearish Takeaways

Bearish analysts argue that with the stock already discounting firm refining margins, easing crack spreads could pressure earnings and limit further upside to the current valuation, even if the headline target range has inched higher.
The shift to more neutral stances, including an Equal Weight view, reflects concern that most of the easy gains have been realized, leaving risk reward more balanced and dependent on flawless execution of the strategic plan.
Uncertainty around potential upstream transactions introduces deal risk, with the possibility that unfavorable terms or regulatory delays could weigh on sentiment and obscure the near term cash flow outlook.
Cautious analysts note that sector wide macro risks, including volatile commodity prices and potential policy shifts around energy transition, could constrain multiple expansion for Repsol even if operational performance remains solid.

What's in the News

Repsol is exploring a reverse merger of its upstream unit with US based APA Corp as one option to list the business in New York, while also holding talks with other potential partners and considering alternative deal structures. This builds on a prior $19 billion valuation that included debt when a 25% stake was sold to EIG in 2022 (Bloomberg / M&A rumors and discussions).
Management continues to prepare the upstream division for a potential liquidity event around 2026, weighing an IPO, a reverse merger with a US listed group, or the entry of a new private investor. Deliberations are still ongoing and no transaction is guaranteed (M&A rumors and discussions).
Repsol has scheduled an upcoming Analyst/Investor Day, where investors are likely to seek more clarity on upstream strategic options, capital allocation, and the implications of any potential New York listing for shareholder returns (Analyst/Investor Day).
Norwegian Cruise Line Holdings and Repsol signed an eight year agreement for renewable marine fuels at the Port of Barcelona starting in 2026, including renewable methanol from Repsol’s Ecoplanta facility from 2029. The agreement reinforces Repsol’s role in low carbon fuels and circular economy projects (Client announcement).

Valuation Changes

Fair Value Estimate nudged slightly higher from approximately €16.20 to about €16.45, reflecting modestly stronger long term assumptions.
Discount Rate risen marginally from around 8.34 percent to about 8.36 percent, indicating a slightly higher required return.
Revenue Growth increased slightly from roughly 3.68 percent to about 3.71 percent, pointing to a modestly more optimistic top line outlook.
Net Profit Margin edged down slightly from around 5.31 percent to about 5.29 percent, implying marginally lower long term profitability assumptions.
Future P/E moved up modestly from roughly 8.66x to about 8.82x, suggesting a small expansion in the valuation multiple applied to forward earnings.

Expansion in renewables and strategic green hydrogen and biofuel investments are set to diversify revenue, stabilize earnings, and enable higher-margin growth in low-carbon markets.
Portfolio optimization and technological upgrades should improve operational resilience, drive efficiency, and support stable earnings from both hydrocarbon and customer-focused divisions.
Repsol faces rising regulatory costs, slow renewable transition, high capital needs, and exposure to market and geographic risks, threatening long-term cash flow and profitability.

Catalysts

About Repsol

Operates as a multi-e energy company in Spain, Peru, the United States, Portugal, and internationally.What are the underlying business or industry changes driving this perspective?

Repsol's continued expansion and asset rotations in renewable energy (notably wind, solar, and renewable fuels) are poised to diversify revenue streams, lessen earnings volatility, and capture higher-margin growth in low-carbon markets; this is strengthened by increasing policy support for renewables and rising demand in both the U.S. and Spain, directly impacting future revenue and net margins.
Strategic investments in green hydrogen and advanced biofuels, supported by regulatory mandates (such as Spain's requirement for renewable fuels with non-biological origin), position Repsol to become a leading supplier in Europe, opening new profit pools and enabling long-term earnings growth with double-digit expected project returns.
Optimization of the upstream portfolio-through targeted divestments of high-cost, high-emission assets and investment in scalable, low-cost growth projects in Alaska, the U.K., and North America-should improve production quality, boost cash flow from operations, and raise return on capital employed (ROCE) and net margins over time.
Ongoing technological upgrades in refining, trading, and chemicals, combined with digitalization and efficiency initiatives, are expected to increase operational margin resilience and reduce breakevens, countering industry cost inflation and enabling Repsol to capitalize on solid refining environments and market volatility.
Long-term global energy demand growth, particularly in emerging markets, along with robust European structural demand in middle distillates, aviation, and industrial sectors, provides a stable base for hydrocarbon sales and customer division earnings, supporting revenue growth and margin stability.

Repsol Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Repsol's revenue will grow by 3.5% annually over the next 3 years.
Analysts assume that profit margins will increase from 1.4% today to 4.7% in 3 years time.
Analysts expect earnings to reach €2.6 billion (and earnings per share of €2.5) by about September 2028, up from €668.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €2.9 billion in earnings, and the most bearish expecting €2.2 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 6.6x on those 2028 earnings, down from 24.2x today. This future PE is lower than the current PE for the GB Oil and Gas industry at 24.2x.
Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 9.08%, as per the Simply Wall St company report.

Repsol Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Growing regulatory pressure and increasing carbon pricing in Europe and internationally will raise Repsol's operational costs and reduce net margins for hydrocarbon-based activities over time.
The company's progress in the transition to renewables and low-carbon businesses remains slower and less extensive than that of larger peers, risking future revenue decline if fossil fuel demand contracts more quickly than anticipated.
Heavy capital expenditure requirements in upstream oil and gas projects, combined with upcoming reductions in net CapEx only after 2026, could result in structurally lower free cash flow and compress earnings if market conditions weaken or project delays occur.
Structural risks in key geographies-including economic and political instability in South America, regulatory uncertainty in Venezuela, and power grid risks in Iberia-expose Repsol's revenues and make cash flow more volatile.
Long-term secular decline in oil demand, given accelerating adoption of electric vehicles, improving energy efficiency, and competition from state-owned and renewable energy companies, threatens to erode sales volumes and price realizations, negatively impacting Repsol's revenues and long-term profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €14.28 for Repsol based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €18.0, and the most bearish reporting a price target of just €11.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €54.8 billion, earnings will come to €2.6 billion, and it would be trading on a PE ratio of 6.6x, assuming you use a discount rate of 9.1%.
Given the current share price of €14.22, the analyst price target of €14.28 is 0.5% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts React to Repsol’s Upward Valuation as Renewable Fuel Strategy Gains Momentum