Upgrade to Buy#

TD Cowen has upgraded TotalEnergies from Hold to Buy, naming it as its top pick among integrated oil companies. This decision is based on the company's strong free cash flow (FCF) growth, better project visibility, and favorable long-term positioning in the market.

Strong Financial Metrics#

Analyst Jason Gabelman highlighted that TotalEnergies exhibits leading or near-leading metrics in several areas, including free cash flow growth, production growth, reserves relative to production, and Return on Capital Employed (ROCE). The broker has also raised its price target for the stock from $80 to $97.

Positive Cash Flow Outlook#

A significant reason for the upgrade is the belief that TotalEnergies has surpassed its free cash flow low point sooner than anticipated. Gabelman mentioned that a gas-to-power acquisition announced for late 2025 has accelerated the recovery of free cash flow, while also lowering future capital spending. He predicts that free cash flow will increase by approximately $11 billion between 2024 and 2030, reaching around $18.5 billion, with yields expected to be about 10% in 2026 and increasing toward 2030. Additionally, the company’s dividend yield of around 5% is considered one of the best in its peer group.

Production Growth and Market Sentiment#

TotalEnergies is expected to see production grow at about 3% annually through 2030, driven by major projects in Suriname, Qatar, and Namibia. Gabelman noted that the economics in these regions are likely to lead to a sustained period of high cash flows from 2028 to 2034. Furthermore, the Integrated Power segment of TotalEnergies has shown promising returns and is aiming for a 12% return by 2030, with demand from data centers acting as a significant growth driver.

Regional Risks#

Despite these positive developments, TotalEnergies' stock has underperformed compared to its peers, partly due to its exposure to the Middle East. TD Cowen estimates that around 15% of production and 10% of upstream cash flow could be impacted by regional disruptions. However, higher commodity prices are expected to mitigate these risks over time. Gabelman pointed out that the company's exposure is mainly in Qatari LNG, offshore UAE, and onshore Iraq, with some production in UAE still at risk but not yet disrupted.