6 Oil and Energy Stocks Analysts Want You to Buy Now

August 15, 2015 by Jon C. Ogg

Investors, oil barons and wildcatters alike have made and lost vast fortunes in the oil patch. The trends of oil busts to oil booms come and go, and currently the oil patch is in the not-fun part of that boom-bust cycle. Still, those investors with long-term views are able to look beyond the next day’s, week’s or month’s direction in oil prices. Some can even look out quarters or years in their hunt for bargains.

This past week brought some very big calls from Wall Street analysts in the oil patch and energy sector. These calls have no intention of predicting the oil price direction tomorrow, next week or even next month. They are looking into 2016 or even further.

24/7 Wall St. tracks many analyst upgrades and downgrades each day to find new ideas, great value and hidden gems for investors and for our readers. Investors need to keep a few things in mind about analyst research reports. These analysts can be wrong, and they often are wrong. Right now, the current direction of oil prices is certainly not helping energy investors looking for long-term bargains.

This week Citigroup lowered its oil projections, and even gave a 30% chance or so that the price of oil could drop well down into the $30s. We also noticed that Warren Buffett keeps exiting out of his oil bets, and Buffett does generally know at least a thing or two about money and investing.

ALSO READ: 5 Defensive High-Yield Dividends for the Next Correction

Again, the oil and gas analysts are not looking at the price direction this week when they make their calls. These are all for long-term investors, and that target group should know that these current prices and future price targets will likely take a hit if oil’s slide continues. These are the six energy stocks that analysts want their firms’ clients to buy now, with additional calls and data at the end.

Anadarko Petroleum Corp. (NYSE: APC) has been called a great value in the oil and sector before, but Argus issued a very warm report calling for massive upside. The firm even named Anadarko as a potentially great buyout candidate ahead. Argus already has Anadarko on its Focus List, but it was so aggressive that it raised its price target to $105 from $100 in its Tuesday call. Anadarko closed at $76.25 on Friday, and it has a consensus analyst price target of $98.06 and a 52-week range of $69.40 to $113.51.

Kinder Morgan Inc. (NYSE: KMI) was given a massive endorsement on Friday by Goldman Sachs. The firm already had a Buy rating, but the king of infrastructure and former master limited partnership (MLP) was raised to the prized Conviction Buy List. Goldman Sachs even assigned a $48.00 price target. Kinder Morgan closed at $33.14 before the call but rose 2.5% to $33.96 afterward on Friday. It has a consensus price target of $46.00 and a 52-week range of $31.09 to $44.71. That 5.8% or so true dividend yield would leave an implied upside of almost 50%, if Goldman Sachs is right.

Laredo Petroleum Inc. (NYSE: LPI) was raised to Outperform from Market Perform at Raymond James last Monday. The firm assigned an $11.00 price target, much higher than the $8.01 prior close. Despite weak oil trends this week and despite the market not being kind to speculative stocks, Laredo Petroleum closed out the week at $9.30. It has a consensus price target of just under $12.00, and the 52-week range is $6.35 to $24.54. For those wanting the other side of the coin: KeyBank started Laredo with a Sector Weight rating later in the week, warning that it faces a deteriorating leverage that may hinder its operations and growth ahead and warning about a premium value to peers.

ALSO READ: 3 Drilling Stocks to Buy Ahead of 2016 Recovery

Nabors Industries Ltd. (NYSE: NBR) was part of an oil services call this last week from UBS, and the drilling and rig services provider is seen having big upside here and abroad as it operates around the world. Nabors was even shown to have posted solid earnings recently, when you consider it against peers. Nabors has close to a 2% dividend yield. Shares were previously around $12.00, but the drop in oil prices crushed its stock for a close of $10.94 on Friday. While the consensus price target had drifted down to $16.00, the UBS price target of $17.00 would imply upside north of 50% now, even without the dividend. Nabors has a 52-week range of $9.91 to $27.34.

Sunoco Logistics Partners L.P. (NYSE: SXL) was a serious standout call in a sector upgrade from Credit Suisse this last week. Many MLPs were featured, but all in all Credit Suisse raised its SXL rating to Outperform from Neutral and gave it a $48.00 price target. It rallied about 10% from its lows of the prior week and closed at $36.32 on Friday. Credit Suisse saw close to 50% total return from its analyst call basis, but that would be closer to 40% now that its units recovered. Sunoco Logistics has a consensus price target of $48.40, as well, and a 52-week range of $32.56 to $52.47.

Aspen Aerogels Inc. (NYSE: ASPN) is a tiny company with a $165 million market cap, and it has been listed last as it serves the energy sector but is not an energy company itself. It is an energy technology outfit that uses aerogel insulation for many key refining, petrochemical, LNG and subsea operations. A firm called Global Hunter initiated coverage midweek with a Buy rating and a $13.00 price target. That is versus a $6.85 prior price and a closing price of $7.20 on Friday. Aspen Aerogels has a 52-week range of $6.21 to $11.14, and it still has some 80% implied upside if the Global Hunter assessment is correct. The consensus price target from seven analysts is $10.93, but the highest analyst target is up at $14.00 and the lowest is $8.00. Needham gave it a Buy rating in new coverage ahead of Global Hunter, and its more conservative price target was $9.50.

ALSO READ: Why Credit Suisse Sees 3 Key MLPs to Buy Now

Again, oil challenged six-year lows and is at the risk of seeing those recessionary lows. Benchmark West Texas Intermediate (WTI) crude closed out the week at $43.11, after having been above $45.00 briefly on Monday and Tuesday. The price trajectory almost seemed as though WTI’s oil price chart has taken a life of its own, with the sole goal of seeing if it can test $40.00. Additional analyst calls and data for the oil and gas sector from this week are included below.

Diamondback Energy, Inc. (NASDAQ: FANG) was started as Overweight with a $91 price target at KeyBanc Capital Markets. This was versus a prior $71.67 close, but Diamondback shares closed up 3.1% at $73.90 on Friday.

Williams Companies Inc. (NYSE: WMB) was given a very positive call from Argus at the start of the week. The firm sees solid value as is, but also sees upside to its target in a buyout analysis as well.

We have a very mixed picture in MLPs. The sector is very weak, but some MLPs saw a bounce of 10% or so from lows this past week. Bottom-fishers and value investors are hoping yet again for a bottom. 24/7 Wall St. also just featured four MLPs still raising their distributions (dividends) to holders.

ALSO READ: Why Warren Buffett Continues to Dump His Exposure to Oil

We also saw a key ratings agency warn that many MLPs could face serious funding risks ahead, but they also see that leading to more M&A as well, with strong outfits buying strong assets that may have weaker financial positions.

Another observation was that short sellers have increased their bets against big oil. If you want another round of a reminder about pain or mixed views in the oil patch, just take a look at what Argus has to say about Exxon Mobil Corp. (NYSE: XOM) and its limited upside view for the world’s largest player.