(Bloomberg) –A month after the world’s largest initial public offering, Saudi Aramco’s investment banks aren’t exactly bullish, with most recommending investors avoid the stock as they kicked off research coverage.

Of the 13 banks tracked by Bloomberg that have begun following the stock, two recommend buying, seven have hold ratings and four say sell. The average 12-month price target is 32.64 riyals, a 5.9% drop from current levels, with Morgan Stanley, at 28.10 riyals, the lowest among the banks that arranged the sale.

The offering was hampered by investors’ unwillingness to value the company at $2 trillion, as sought by Saudi Crown Prince Mohammed bin Salman. Investment banks’ estimates ran from $1.1 trillion to $2.5 trillion, but when fund managers balked at the high end, the kingdom scrapped a planned international offering and sold shares only on the domestic market.

The stock price already reflects Aramco’s strengths, such as its low production costs, long reserve life and strong free cash flow, according to Morgan Stanley, which has an underperform rating.

The target takes into consideration Aramco’s high oil price sensitivity, exposure to geopolitical risks and limited influence that minority investors are likely to have, Morgan Stanley’s Martijn Rats wrote in a report.

Buy Recommendations

While JPMorgan Chase & Co. and Arqaam Capital Ltd. have buy recommendations on Aramco, Goldman Sachs Group Inc. has the highest price target, 41 riyals, to go with its neutral rating.

Aramco stands out from the rest of the industry “on both quality and scale metrics,” Goldman’s Michele Della Vigna wrote in a report.

Aramco fell 0.4% to 34.70 riyals in Riyadh on Wednesday, giving the company a market value of $1.85 trillion, the highest in the world. The stock is up 8.4% from its IPO price of 32 riyals, though down from a closing peak of 38 riyals last month.

At the time of the offering, many foreign investors cited high valuation, corporate governance and geopolitical risk as reasons to stay away from the shares.

The deal ended relying mostly on Gulf individual and institutional investors, including sovereign wealth funds from neighboring Abu Dhabi and Kuwait.

More from the reports:

Goldman Sachs (Neutral, PT 41 riyals)

• Highlights that Aramco has a reserve life of 52 years, versus an average of 12 years for major industry peers.
• Goldman’s analysis of the industry’s most critical energy assets suggests that non-OPEC production should slow to a standstill in 2021, following a decade of growth by shale oil and broader oil and gas over-investment
• Stock valuation and potential 18% upside is based on relative ranking framework for peers, which considers resource life, scale, production growth, returns, balance-sheet strength, dividend growth and dividend payout

Morgan Stanley (Underweight, PT 28.1 riyals)

• Share price already reflects the company’s strengths, such as its low costs. Also cite as positive for the company its extensive reserve life, high returns and strong free cash flow
• Target price takes into consideration the company’s strengths and “unique asset base,” but also its high oil price sensitivity, exposure to geopolitical risks and limited influence that minority investors are likely to have
• Continued strength in oil price, perhaps from a “sharper-than-expected” slowdown in U.S. production or a re-acceleration of demand, could provide upside risk to call

Citi (Neutral, PT 34.1 riyals)

• Relative valuations are “unappealing,” and the company’s equity story is seen as “comparatively better suited” to an environment of low oil prices
• Free cash flow yield of around 4% for 2020/21 is “significantly below” the average of 6% for international oil company peers
• Aramco seen as a defensive play, highlighting that its durability “reflects a combination of balance sheet (the only AAA-rated oil company), a low cost of supply and the ‘dividend guarantee’ afforded minority investors”

JPMorgan (Overweight, PT 37 riyals)

• Fair value for the company estimated at $2 trillion on dividend growth outlook, with the stock offering minority shareholders bond properties with equity upside; dividend has scope to increase from the $75 billion baseline as production scales up
• Premium barrels, flexibility on capital expenditures, captive crude demand through vertical integration into the eastern hemisphere and low gearing are among factors that enable Aramco to commit to distributing higher percentage of cash flow
• Risk cited as “unique,” with September attack highlighting the kingdom’s vulnerability, but also providing “proof of concept” with robust contingency and response planning

HSBC (Hold, PT 36.80 riyals)

• Company offers unmatched scale, long-term outlook and cost structure, with crude supply being determined by the government and “is only likely to grow slowly in the next few years”
• Other drivers include supplying Saudi natural gas demand and aggressive expansion downstream both in petrochemicals and refining
• With base-case scenario of $65/barrel for Brent price, there is scope for special dividends beginning in 2022, and dividend is resilient to lower crude prices

Credit Suisse (Neutral, PT 31.50 riyals)

• Company’s upstream portfolio quality and depth are “second to none,” as it is vast in size with limited renewal risks and low costs
• Improvements in fiscal terms are expected amid lower oil royalties starting this year, and higher gas prices and a rising “call on Saudi crude” over time should allow strong cash flow to support expected dividend per share growth of about 5% between 2020-2023
• Risks include security, “governance (amid lack of track record)” and climate change
  Bank of America Merrill Lynch (Neutral, PT 36 riyals)
• Company’s “outstanding fundamentals” are now fully priced in, with the stock trading at a premium to global emerging markets and to international counterparts
• “Low-cost, prudently managed resources” allow the generation of high free cash flow and “very impressive returns on its upstream investment”
• Expects dividend to grow progressively at 3% a year, with estimate of the company distributing $30 billion to $120 billion to shareholders (post M&A) at a target leverage of 15% and oil price between $60-$70/barrel

Aramco’s bankers

The IPO was led by nine joint global coordinators: Bank of America, Citigroup, Credit Suisse, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, NCB Capital and Samba
Sixteen other banks had a lower role on the deal as joint bookrunners: Al Rajhi Capital, BNP Paribas, BOC International, Credit Agricole, Deutsche Bank, EFG-Hermes, First Abu Dhabi Bank, Gulf International Bank, Mizuho, Royal Bank of Canada, Riyad Bank, Santander, Saudi Fransi Capital, Societe Generale, Sumitomo Mitsui Financial Group and UBS

–With assistance from Hanna Hoikkala and Matthew Martin.