It may feel like it has taken some time to get here, but the price of oil has been solid this past week, despite a prior threat that it might break under $50 a barrel. The gains come on the heels of an OPEC production cut extension, as well as hopes that excess oil supplies in the United States will be worked down. West Texas Intermediate (WTI) crude was close to $55 on Friday, and Brent crude was close to $61.
24/7 Wall St. reviews many analyst upgrades and downgrades during the week, and there are usually some key calls in oil and gas and in other energy-related companies. We tracked several upgrades or big upside price targets in which analysts were telling their firms’ clients to buy the stocks.
Investors should keep a few things in mind before blindly jumping in just because an analyst report is positive. First, oil has been recovering in price, but many segments in oil and gas stocks remain quite weak. The Dow and S&P 500 have continued to hit all-time highs, and the bull market is now closer to being nine years old than eight. A lot of good things in business, regulation and policies have already been priced into the stock market. And lastly, when it comes to oil and gas many analysts are often very good at issuing Sell ratings at the bottom and Buy ratings after big recoveries.
So, investors and traders should only use analyst upgrades and positive calls as a starting point rather than as a final decision in the process. We wouldn’t want you thinking we blindly trust all analyst calls just because they are issued by smart people or by large firms. The traditional upside in Buy and Outperform rated stock at this stage in the bull market is generally 8% to 10%.
Trading data and color has been included on several top analyst calls in the oil and gas sector from the week of November 3. The consensus price targets are from the Thomson Reuters sell-side universe.
Here are seven analyst calls looking for solid upside in oil and gas related companies from the week of November 3, 2017.
Chevron Corp. (NYSE: CVX) closed down 4% at $113.54 after earnings the prior Friday, but this stock ended this past week at $114.99. It was reiterated as Buy with a $137 target price at Jefferies on October 30, and the firm said that the big post-earnings drop presented a buying opportunity in an oil giant poised for both significant production growth and a major inflection in its cash cycle. Chevron has a 52-week trading range of $102.55 to $120.89 and a consensus analyst price target of $122.89.
Devon Energy Corp. (NYSE: DVN) was raised to Overweight from Equal Weight by at Stephens on November 2. The firm’s $53 price target compared with a $39.08 prior close, but that was after a 5% gain. Shares closed at $39.27 on Friday. Jefferies reiterated its Buy rating on Devon and also raised its target to $45 from $43. The shares have a 52-week range of $28.79 to $50.69 and a consensus price target of $41.48.
HollyFrontier Corp. (NYSE: HFC) was started as Overweight with a $47 price target at Barclays on November 2. The prior closing price was $39.65. Goldman Sachs also upgraded its rating on HollyFrontier, but that was only to Neutral from Sell, with a $40 price target. The shares were up 7.3% on Wednesday ahead of the call, and they were trading at $40.14 on Friday’s close. The stock had a 52-week range of $22.63 to $39.77 prior to the calls, so this is an upgrade after a big run. The $35.50 consensus target price was also lower than the current price on last look.
Marathon Oil Corp. (NYSE: MRO) may have been dull on Friday after earnings, but at $15.58 its shares are about halfway through the 52-week range of $10.55 to $19.28. Its market cap is also more than $13 billion, and the consensus analyst target was just $16.12 ahead of these post-earnings analyst calls. Barclays is less aggressive here, after raising its price target to $14 from $13, but two positive calls were seen: Jefferies raised its target to $16.50 from $14, and RBC Capital Markets raised its target to $18 from $16.
Weatherford International PLC (NYSE: WFT) was raised to Outperform from Market Perform at Sanford Bernstein, but what stood out here was the firm’s $6.50 price target raised from $5.50. That was up more than 70% from Thursday’s closing price of $3.79, and it was higher than the consensus target price of $5.89. Weatherford has a 52-week range of $3.16 to $7.09 and its market value was $3.9 billion on Friday.
And in small-cap and more speculative names in the energy patch, two calls are featured below.
Fairmount Santrol Holdings Inc. (NYSE: FMSA) is one of the battered fracking-sands stocks, but it was last seen up almost 100% from its crush-depth lows earlier this year. Jefferies reiterated its Buy rating on November 3 and raised its target price to $6 from $5 in a post-earnings call. The stock now has a 52-week trading range of $2.46 to $13.12, and the consensus analyst target was $5.08.
Bill Barrett Corp. (NYSE: BBG) was raised to Outperform from In-Line with an $8 price target at Imperial Capital on November 2. The prior closing price was $5.99, but the shares closed at $6.73 on Friday. On November 3, a firm named KLR Group also raised its target, to $11 from $9. This company explores for and develops oil and natural gas resources with interests in the Denver-Julesburg basin and the Uinta Basin in the Rocky Mountain region. Its 52-week range is $2.66 to $8.24, and the market cap is just $513 million. Take note that the prior consensus target price was down at $5.38 on last look.
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