On Tuesday, Chevron Corp (NYSE:CVX) stock received a rating upgrade from Citi, moving from Neutral to Buy, with a significant increase in the price target to $185 from the previous $145. The upgrade comes after a period of underperformance by Chevron's stock compared to its key competitor ExxonMobil (NYSE:XOM) and the broader S&P 500 index throughout 2024.
Citi's analysis suggests that Chevron's stock is trading at a valuation discount, which is expected to widen to 20% relative to ExxonMobil by 2026/27. This gap is considered historically large between the two energy companies. The firm believes that the current valuation offers investors a favorable risk-reward balance, especially considering the uncertain outcome of the upcoming Hess arbitration in 2025.
The firm also pointed out that Chevron's downside appears to be protected while the upside potential is significant. This optimistic outlook is further bolstered by the potential high-impact exploration activities in Namibia in the near future. Citi has placed Chevron under an Upside Catalyst watch in anticipation of the drilling campaign in Namibia, indicating that positive results could provide additional momentum for the stock.
Chevron's stock performance and the anticipated growth trajectory have been key factors in the upgraded rating and price target. With the exploration in Namibia on the horizon, Citi's analysis suggests that now may be a strategic time for investors to consider the energy stock.
In other recent news, Chevron has resumed operations at its Gulf of Mexico platforms following Hurricane Rafael. The energy company has redeployed staff and restarted production at these strategic assets, which significantly contribute to Chevron's overall output.
In a recent update, Mizuho (NYSE:MFG) Securities increased the price target for Chevron from $189 to $194, maintaining an Outperform rating. This adjustment follows Chevron's strong operational execution across its upstream portfolio and the company's expectation to achieve its production target from the Permian Basin ahead of schedule.
TD Cowen, however, retained a Hold rating on Chevron shares with a consistent price target of $160. The firm's assessment focused on Chevron's current projects and strategic financial maneuvers, including a cost savings program expected to exceed $2 billion.
Truist Securities also maintained a Hold rating on Chevron but raised the stock's price target to $155 from $150. The firm highlighted potential gains if Chevron successfully acquires Hess Corporation (NYSE:HES), despite anticipating minimal earnings and free cash flow growth in the next year.
In the third quarter of 2024, Chevron reported strong earnings with profits amounting to $4.5 billion or $2.48 per share, driven by a 7% increase in worldwide production. These are some of the recent developments involving Chevron Corporation (NYSE:CVX).
InvestingPro Insights
Chevron's strong market position and financial health align with Citi's optimistic outlook. According to InvestingPro data, Chevron boasts a substantial market capitalization of $288.18 billion, underscoring its status as a major player in the oil and gas industry. The company's P/E ratio of 17.69 suggests a reasonable valuation, especially considering Citi's view of a widening discount relative to ExxonMobil.
InvestingPro Tips highlight Chevron's financial stability and shareholder-friendly policies. The company has maintained dividend payments for 54 consecutive years and has raised its dividend for 37 consecutive years, demonstrating a strong commitment to returning value to shareholders. This consistent dividend growth, coupled with a current dividend yield of 4.07%, may appeal to income-focused investors.
Moreover, Chevron's stock is trading near its 52-week high, with a one-year price total return of 15.44%. This performance, combined with analysts' predictions of profitability for the current year, supports Citi's bullish stance on the stock's potential.
For investors seeking a deeper understanding of Chevron's prospects, InvestingPro offers additional insights with 10 more tips available, providing a comprehensive view of the company's financial health and market position.
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