Suncor Energy's (SU) shares have risen due to "strong" operations and quarterly results as well as improved shareholder returns despite macroeconomic uncertainty weighing on oil producers, Morgan Stanley said in a note Monday.
The energy sector continues to trade at a wide discount relative to the S&P 500 and following the recent rally, Suncor's stock leaves limited upside for further gains, according to the note.
The firm said that Suncor is making headway on its plan to reduce corporate breakeven cost by 10 Canadian dollars ($7.02) per barrel and the company is progressing "well ahead of schedule."
The stock remains attractive in the long term, but its recent outperformance brought relative valuation back in-line with peers, the firm added.
"[Suncor's] 9% [free cash flow] yield in 2025 is now fairly in-line with peers and shares hit our price target in recent weeks," Morgan Stanley said.
The brokerage downgraded its rating on Suncor's stock to equal-weight from overweight and lowered the price target to C$56 from C$57.
Price: 36.17, Change: -0.61, Percent Change: -1.65
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