Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high.
Chevron. (CVX) Chevron has already said that lower oil prices will hurt its Q4 06 results. The stock has moved from a 52-week high of $76.20 to under $70 to reflect the market’s concern. But, Chevron has additional production coming online from Africa and Kazakhstan, so, if oil moves back toward the mid-$60 range again, the company should continue to do very well. The company also has a large operating base in Asia where oil demand is rising faster than anywhere in the world.
The open question about Chevron is the same as it is for all Big Oil companies. Our forecast on Chevron is based on oil prices rising back to above $60. A warm winter in the US will not offset the huge demand in countries like China. Lower oil should also fuel demand for gas in the US as the lower pump price gets Americans back on the road. A terrorist act or quick deep freeze across the northern US could quickly move per barrel prices back up.
As Barron’s pointed out not long ago, Conoco and Chevron has the lowest P/Es of any of the 50 largest companies in the world based on market cap. Two analysts quoted in the story put their target price on the stock at over $90. While that may be wishful thinking, increasing oil prices should lift Chevron.
Reasons the the stock might rise above target: Any events that push oil prices up, especially for an extended period.
Reasons that the stock might fall below forecast: Sustained oil prices below $55 a barrel.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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