The oil and gas segment in energy has seen its shares of ups and downs in 2020. After what looked like a dead industry during the peak of the economic panic and pandemic-driven destruction demand, oil has at least come back to where fewer companies are facing existential risk. West Texas Intermediate crude came back above $40 a barrel in early June, and it has been hanging above $40 for most of July.
The research team at Goldman Sachs publishes many Buy and Sell ratings, but the most prized companies are generally referred to as Conviction Buy List stocks. These are the firm’s top ideas and are generally in mid-cap to large-cap companies. Goldman Sachs actually has seven oil and gas stocks on its Conviction Buy list, and it even has one solar stock.
Investors should always know never to use one firm’s research as a sole reason to buy or sell a stock. There are always other firms issuing coverage that coincides with or disagrees with a rating, and analysts can be wrong on their investment calls, just like investors can be wrong in their decisions.
The move to environmental, social and governance (ESG) themes has limited much of the interest in oil and gas stocks. After all, they are major sources of pollution, and many investment funds now have bans against investing in anything that is tied to fossil fuels. Still, Goldman Sachs believes all these energy stocks have considerable upside ahead.
24/7 Wall St. has provided some color on each call and compared the Goldman Sachs targets to the Refinitiv consensus analyst target prices to show whether there is really any stronger conviction than the average analyst expectations for the stock.
Baker Hughes Co. (NYSE: BKR) is one of the top oilfield services players out there, and Goldman Sachs has a $23 target price. This implies close to 41% upside from the current price, despite a drop in revenues largely expected in 2020.
Baker Hughes stock was last seen at $16.31, in a 52-week range of $9.12 to $25.99. The consensus price target is $19.42.
Cheniere Energy Inc. (NYSEARCA: LNG) remains the top play for exporting liquefied natural gas to other countries. The company owns the Sabine Pass LNG terminal in Louisiana and the Corpus Christi LNG terminal in Texas, as well as interconnecting pipelines. The $71 price target at Goldman Sachs implies more than 40% upside, if its assumptions come true, but this stock has traded at $70 for only very brief periods since shares were much higher back in 2015.
Cheniere Energy stock was trading at $49.79, with a consensus price target of $65.80. The stock has traded in the range of $27.06 to $68.16 over the past year.
ConocoPhillips (NYSE: COP) comes with an impressive 4% dividend yield, and it has a $44 billion market cap. The Houston-based oil and gas player has an implied upside of nearly 35% to the Goldman Sachs target of $56, but that target price is still not anywhere close to its recent highs.
ConocoPhillips stock was changing hands at $40.99. It has a consensus price target of $51.29 and a 52-week range of $20.84 to $67.13.