Why Bank of America Says Ecopetrol Could Still Fall Nearly 30 Percent

Markets

Colombia just elected a market-friendly president, yet Bank of America thinks Ecopetrol still has nearly a third to fall, a warning that the good news may already be in the price.

Why Bank of America Says Ecopetrol Could Still Fall Nearly 30 Percent. (Photo Internet reproduction)

A new government seen as friendlier to oil has not changed Bank of America’s mind. The bank kept a negative view on Ecopetrol, Colombia’s state-controlled oil company, even after the election.

The headline is blunt. Analysts at the bank set a price target that implies the shares could fall by about twenty-eight percent from where they closed on June 23.

For a reader abroad, the context matters. Ecopetrol is Colombia’s largest company, its shares trade in New York as well as Bogotá, and it is a household name for investors in the region.

Why Bank of America is wary of Ecopetrol

The core argument is about timing, not politics. The bank says much of the hope for a friendlier government is already reflected in the share price.

The numbers behind that are striking. By the bank’s account the stock rose around seventy percent over the past year, as investors bet that a change of government was coming.

That rally stretched the valuation. The bank notes the shares moved from near three times a common measure of core earnings to about four and a half times, a clear premium.

The comparison is regional. Other Latin American oil companies trade between roughly two and a half and three and a half times that same measure, so Ecopetrol now looks expensive beside them.

The bank frames the value in cash terms too. Assuming oil around seventy-two dollars a barrel in 2027, it estimates the company would throw off a free-cash-flow yield of about nine percent.

A solid yield, but not enough on its own. In the bank’s view that return does not justify the premium, given how much the rally already leaned on political hope rather than output.

The case the new government could make

The bank does not dismiss the bull case entirely. It accepts that the incoming administration could make oil and gas a priority and push to deregulate strategic industries.

Specific measures are on the table. These could include reversing limits on exploration, allowing fracking projects, and reviving the signing of exploration and production contracts.

But the payoff is slow. The bank points out that major growth projects have long timelines and would not lift production in the near term, so the story rests on results that are years away.

What the Ecopetrol valuation hinges on next

So attention shifts to delivery. The bank wants to see proof in output growth, reserve replacement and financial discipline, rather than another move driven by politics.

The make-up of the new board will also matter. Who sits on it, and how the energy-transition strategy evolves, will shape whether investors trust the company’s direction.

There is a bigger cloud overhead too. The bank projects a Colombian fiscal deficit of more than seven percent of output this year, a strain that hangs over every state-linked asset.

What it means for investors

The first lesson is a familiar market saying. Investors often buy the rumour and sell the news, and a long rally into an expected event can leave little room for further gains.

The recent price action fits that pattern. Since the vote the main Colombian index has fallen sharply and Ecopetrol has dropped hardest, hurt as well by a slide in global oil prices.

The scale of the reversal is clear. By the bank’s reckoning the benchmark index has fallen more than six percent since the election, while Ecopetrol shares have shed close to sixteen percent.

That undoes much of a strong year. Before the vote the local stock market had been up around twenty percent in 2026, with Ecopetrol among the biggest winners.

One bank’s target is not destiny, of course. It is a single view, the company declined to comment on it, and other analysts read the same facts more kindly.

The wider point is about expectations. When a stock has already priced in a hoped-for outcome, the harder question is what is left to deliver, and that is the test Ecopetrol now faces.

The Ecopetrol bear call, questions answered

What did Bank of America say?

It kept an underperform, or sell, rating on Ecopetrol. Its price target implies the shares could fall by about twenty-eight percent from their June 23 close, despite the market-friendly election result.

Why is the bank negative?

It argues the hope of a friendlier government is already in the price after a roughly seventy percent rally. That left the shares trading at a premium to other Latin American oil companies.

What would change the view?

Proof in the numbers, such as output growth, reserve replacement and financial discipline. The bank also flags Colombia’s large fiscal deficit as a risk hanging over the state-controlled company.