On Friday, Truist Securities increased its price target on shares of Chevron (NYSE:CVX) to $160.00, up from the previous $155.00, while keeping a Hold rating on the stock. Currently trading at $159.33, Chevron is near its 52-week high of $167.11, with InvestingPro data showing the stock has delivered an impressive 11.42% return year-to-date.
The firm's analyst noted Chevron's substantial inventory, which includes ample royalties, and projected a cash flow inflection for the next year. The analyst's outlook is based on expectations of improved capital efficiency, particularly from operations in the Permian Basin, which is anticipated to experience modest growth with reduced spending starting in 2026.
The analyst believes that Chevron's capital efficiency will be bolstered by several domestic and international plays. These include the DJ Basin, Tengizchevroil (TCO) in Kazakhstan, projects in the Eastern Mediterranean, West Africa, and others, which may offer additional upside potential.
With a robust dividend yield of 4.09% and a 37-year streak of dividend increases, as highlighted by InvestingPro, Chevron demonstrates strong financial stability and shareholder commitment. The revised price target reflects a modest increase due to these incremental capital efficiencies.
Chevron's dinner event provided insights into the company's strategy and assets, which were significant enough for Truist Securities to adjust their valuation of the company's shares. The analyst's comments suggest that Chevron's varied portfolio of projects across the globe is a critical factor in their assessment.
The updated price target of $160 represents Truist Securities' estimation of Chevron's share value based on the anticipated improvements in capital efficiency and the company's robust project pipeline.
According to InvestingPro's Fair Value analysis, Chevron appears slightly undervalued at current levels. The Hold rating indicates that the firm does not currently recommend buying or selling Chevron shares but acknowledges the company's potential for future growth. With an overall Financial Health score of "GOOD" and consistently strong cash flows, Chevron maintains a solid foundation for future expansion.
Chevron, as one of the leading energy companies, has been focusing on the Permian Basin, one of the most prolific oil-producing areas in the United States. The company's approach to capital efficiency and strategic investments in various regions contribute to its overall financial outlook, as highlighted by the analyst's remarks.
In other recent news, Chevron Corp. has announced a reduction in its capital expenditure (capex) budget for 2025, with a focus on financial discipline and cash flow growth. The company's Permian Basin spending will decrease by up to 10% in 2025, reflecting a strategic shift towards prioritizing financial returns over production growth. Despite this, Chevron plans to continue increasing its output from the Permian next year, albeit at a slower pace.
On the analyst front, Chevron's stock was upgraded from Neutral to Buy by Citi, which also raised the price target to $185, driven by optimism surrounding the upcoming drilling campaign in Namibia. Piper Sandler maintained an Overweight rating on Chevron shares, citing strong portfolio momentum and attractive valuation compared to its peers.
In terms of earnings, Chevron reported Q3 2024 profits of $4.5 billion or $2.48 per share, a result of a 7% increase in global production. These are some of the recent developments surrounding Chevron Corporation (NYSE:CVX).
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