SUBC: Long Term Revenue Concerns Will Restrain Future Share Price Upside

Analysts have modestly trimmed their price target on Subsea 7 to NOK 208 from NOK 212, reflecting slightly lower long term revenue growth expectations, partly offset by improved margin and valuation assumptions.

Analyst Commentary

Bearish analysts point to the modest price target cut to NOK 208 as a signal that expectations for Subsea 7's long term revenue trajectory are being recalibrated, even as near term fundamentals appear solid. The adjustment highlights lingering uncertainties around the pace and durability of offshore project awards and execution amid a normalizing cycle.

JPMorgan, which maintains a Neutral stance, frames the lower target as a balance between supportive margin trends and a more conservative view on top line growth. The updated valuation reflects a view that while Subsea 7 is well positioned operationally, the risk reward profile is now more finely balanced than before.

Several bearish analysts stress that the stock's recent performance has already priced in a significant portion of the margin improvement story, leaving limited room for upside if growth underwhelms or project delivery is delayed. As a result, they see the latest target revision as a move to better align expectations with a more measured growth and profitability outlook.

Bearish Takeaways

• Bearish analysts view the reduced price target to NOK 208 as confirmation that upside from earnings growth is moderating, with less scope for multiple expansion at current trading levels.
• The more cautious stance reflects concern that long term revenue growth could lag earlier projections if offshore investment cycles soften or project sanctioning slows.
• Execution risk on a growing backlog is flagged as a key factor, with any cost overruns or schedule slippage seen as a threat to the margin gains now embedded in valuation models.
• Neutral ratings, even from major houses like JPMorgan, underscore a perception that the risk reward balance is increasingly symmetrical, which limits near term rerating potential despite operational strengths.

What's in the News

• Seaway7, part of the Subsea 7 Group, secured a sizeable contract from Ocean Winds for the BC-Wind offshore wind project in the Baltic Sea. The scope covers transport and installation of 26 transition pieces and an offshore substation, with offshore activity starting in 2027 (company announcement).
• Subsea 7 won a sizeable decommissioning contract from Ithaca Energy for the Alba Floating Storage Unit and Greater Stella field FPF-1 facility east of Aberdeen. The work includes pipeline flushing, diver support vessel services, and seabed clearance, with offshore work beginning in the second quarter of 2026 (company announcement).
• The company revised its 2025 guidance and now expects revenue between $6.9 billion and $7.1 billion with margins of 20% to 21%. It also guided 2026 revenue to a range of $7.0 billion to $7.4 billion (company guidance).
• Shareholders approved a special dividend of 105 million, about NOK 4.15 per share, tied to a permitted business divestment under the merger agreement with Saipem. The dividend is to be paid upon closing of the transaction or immediately before the merger effective date (extraordinary general meeting resolution).

Valuation Changes

• Fair Value, expressed in NOK per share, has risen slightly from about 170.1 to approximately 174.6, reflecting modestly higher intrinsic value assumptions.
• The Discount Rate has fallen slightly from around 6.96 percent to about 6.68 percent, indicating a marginally lower perceived risk profile or cost of capital.
• Revenue Growth assumptions have been trimmed slightly from roughly 3.05 percent to about 2.54 percent, pointing to a more conservative long term top line outlook.
• Net Profit Margin expectations have increased moderately from about 7.36 percent to roughly 8.27 percent, signaling improved profitability assumptions in the valuation model.
• The future P/E multiple has declined modestly from around 11.1x to about 10.3x, suggesting a slightly more cautious stance on valuation multiples despite stronger margin assumptions.