Why Equinor shares fell 5% on Tuesday

The market has drained the energy from the energy stock Equinor (EQNR -4.83%) Tuesday. Rather than the move on company news, the Norwegian oil and gas company took a hit when an analyst following the stock cut its price target. By the end of the day’s trading session, Equinor’s share price was down almost 5%, compared unfavorably with the relatively modest 2.2% drop in S&P 500 index.

Cutting while maintaining

The person behind the discount was JPMorgan Chase expert Christian Malek. Well before the US market opened, Malek cut his price target for Equinor by 10 Norwegian kroner ($9) to 250 kroner ($24). While doing so, he maintained his underweight (sell, in other words) recommendation on the energy stock.

The reasoning behind Malek’s move was not immediately apparent. However, it is not the first such adjustment by an analyst in recent days. Last Friday, Malek’s peer Martijn Rats at Morgan Stanley He also became more bearish on Equinor’s future.

Rats went so far as to downgrade his recommendation for the company to underweight from his previous equal weight (hold) as he cut his price target to 270 kroner ($25) from 305 kroner ($29) .

The dividend may not be worth it

Morgan Stanley’s new rating was largely based on Equinor’s dividend. Rats wrote in its latest research note that the company aims to raise its quarterly payout by the equivalent of $0.02 each year, which should put it at $1.90 per share by the end of the decade. However, this analysis indicated that the present value of the energy company’s future dividend stream is 6% below current levels. This, according to Rats, is “consistent with our underweight rating”.