TD Cowen Downgrades Valero to Hold, Sees Limited Upside

TD Cowen downgraded Valero Energy (NYSE:VLO) from Buy to Hold, raising its price target from $118 to $140 but warning that the stock now reflects much of the sector’s recent bullishness, leaving limited room for further gains.

Valero shares have risen 19% year-to-date, closely tracking the broader refining sector. Since early 2024, the stock is up 12%, and since 2022, it has surged 90%, making it one of the top performers in its peer group.

TD Cowen estimates the stock is currently pricing in about $7.30 per barrel in EBITDA—a level near historical highs, excluding the extreme earnings seen during the Russia-Ukraine conflict in 2022–2023. The firm sees valuations as stretched, with limited underlying earnings growth to justify additional upside at this point.

Valero remains a strong free cash flow generator, and share buybacks—potentially as high as 15 million shares annually—could support FCF per share over time. However, TD Cowen notes that investors typically focus on near-term refining dynamics, and with much of the optimism already priced in, the stock could be set for stabilization or downside from here.