The rapid fall of oil from $100 to under $50 has caught many investors, economists, analysts and workers in the oil patch by surprise. Oil closed out the week under $50, but analysts have started becoming more selective in their oil and gas stock picks. It seems as though the market is starting to work past the raw news flow of the drop in oil, and 24/7 Wall St. has highlighted six fresh oil and gas stocks that analysts want investors to buy.
If oil starts to stabilize, then the drop of 20%, 30% or much more may have proven to be an incredible buying opportunity. If oil turns back down and heads to $40 or lower, well let’s all admit that the value opportunity will have likely turned into a value trap.
24/7 Wall St. reviews dozens of analyst calls each day of the week to find hidden gems and hidden value calls for its readers. Some analyst calls cover stocks to buy and some cover stocks to sell. What stood out in this weekend’s review of the top analyst calls was that large-cap oil and gas stocks with above market returns were being called for. Last weekend’s feature was focused on master limited partnerships (MLPs).
These are this past week’s top six oil and gas stocks that analysts suggest their firms’ clients buy.
Carrizo Oil & Gas Inc. (NASDAQ: CRZO) was started as Buy and was given a $60 price target at Societe Generale on Monday. The prior close was $50.17, and Carrizo closed the week at $50.05. That leaves 20% upside if the firm is right, but investors should know that the consensus analyst price target is lower at $56.63. Carrizo is also a $2.3 billion exploration and production company.
Devon Energy Corp. (NYSE: DVN) was reiterated as Outperform at Credit Suisse on Monday, and the firm’s price target was raised to $80 from $75. What stood out here was that the prior close was $59.15, implying upside of almost 35% at the time. Even after closing at $62.55, the Credit Suisse target leaves an implied upside of 28%, and closer to 30% if you include the dividend, and if the firm is right. The call took EnLink and its reserves as the driving force. Devon has a 52-week trading range of $51.76 to $80.63 and a consensus price target of $70.81. Its market cap is $25.7 billion.
Exxon Mobil Corp. (NYSE: XOM) was featured as one of three top stocks in the energy patch at Wells Fargo, even if the firm was cautious on oil and the outlook for most of the stocks. Exxon’s fair value range was reduced to $93 to $97 from a prior range of $96 to $106. Shares closed at $84.30 on Friday, leaving upside of close to 13%, before taking into consideration the 3.2% dividend yield. That dividend is likely to be raised marginally over the coming month or so. Exxon’s 52-week trading range is $82.68 to $104.76, and it has a $93.20 consensus price target. Exxon is the world’s largest energy stock, with a $353 billion market cap.
Kinder Morgan Inc. (NYSE: KMI) closed up about 1% last week, in part from Stifel starting coverage with a Buy rating. The MLP-turned-corporation was given a $47 price target in the call. The upside for dividend growth in the coming years was one of the driving factors in the call. This leaves more than 15% in implied upside, if you count the 4.3% dividend yield. Kinder Morgan was also featured a week earlier in the oil and gas stocks analysts want you to buy. With shares at $41.72, the consensus analyst target price is $47.25 and the 52-week range is $32.10 to $43.18.
National Oilwell Varco Inc. (NYSE: NOV) sounds very positive when you hear that the independent research firm Argus reiterated its Buy rating. After all, the stock has dropped from over $80 to $50 in this oil drop. What stood out the most here was that Argus slashed its price target to $57 from $85. The prior close was $49.84, and shares closed the week at $51.01. Argus admitted in the call that it expects 2015 to be a challenging year for NOV, but it also expect the $14.3 billion backlog and undervalued balance sheet to cushion the blow. Long term, the firm sees more opportunity. It might seem hard to get excited about a 15% total return projection from an analyst when you consider how much this stock has dropped. Still, Argus is still telling investors to buy shares. The consensus target is $54.90, and the 52-week range is $46.08 to $86.55.
Williams Companies Inc. (NYSE: WMB) was also given a late-week analyst call at Argus. The independent research firm reiterated its Buy rating, but it also lowered its price target to $58 from $61. Shares closed at $50.30 this week, leaving an implied upside of 15.3%, or about 20% if you add the 4.6% dividend yield. The 52-week trading range is $39.31 to $59.77, and the consensus price target is $54.50. Also note that Argus had the highest price target prior to the lowered number, and now the highest target is $60. Argus signaled that the current share price undervalues strong growth prospects and low exposure to commodity pricing, with an expected 10% to 15% annual dividend growth over the next three years.