Stocks were looking to take back some of last week’s losses in early trading today. As a result of Friday’s sell-off, the Dow lost more than 900 points for its worst decline this year. The move downward came amid low trading volume during a holiday-shortened session. Analysts say the route was overdone and see this as a buying opportunity.
“We would be aggressive buyers of this pullback,” wrote Fundstrat’s Tom Lee in a note to clients. “As with the case for Beta and Delta variants, the ‘bark’ has proven worse than the bite in each of those precedented instances. The market carnage, in our view, will be short-lived and transitory.”
The new variant spooked oil investors, which led to the most significant one-day drop since April 2020, dragging oil prices down more than 10%. Investors fled out of energy stocks as concerns mounted that a supply surplus could swell in the first quarter.
If you are of the camp that believes OPEC+ is likely to respond to the variant concern with a pause in production or an outright production cut, then you may be looking for bargains in some of the names that were torn down during last week’s panic.
Looking out into the horizon, we still see a bullish future for energy and think that the panic-driven reaction on Friday created some prime entry opportunities for some of the most desirable energy names. Today we’re covering one such stock.
Leading integrated energy company Chevron Corporation (CVX) is involved in virtually every facet of the energy industry. Chevron produces and transports natural gas; refines, markets distributes transportation fuels and lubricants; manufactures and sells petrochemicals and additives; and generates power.
CVX’s share price closed 2.3% lower on Friday amid panic and light trading volume. This morning dip buyers are stepping in on this time-tested name. The stock boasts a significant yield, nearly 5%. The company’s track record of rewarding investors means that dividend is not likely to shrink or disappear.
Some countries are starting to restrict international travel again in an effort to control the spread of the Omicron Variant. Because of this, jet fuel demand will likely take a hit and delay the oil demand recovery. But, as was the case for the Delta and Beta Variant instances, these restrictions could be relatively short-lived.
As of Sunday, OPEC and its allies have postponed technical meetings to later this week while they assess the impact of the Omicron Variant on oil demand and prices. Several experts expect a pause in oil production to be the result.
On Friday, RBC Capital analyst Biraj Borkhataria upgraded Chevron to Outperform and raised the firm’s price target to $145 from $130, stating that he believes the macro backdrop remains highly supportive for oil. The analyst thinks Chevron is in a position to benefit from a “strong” commodity cycle over the coming years, given its business plans “suggest much more stability in its portfolio than peers.”
Of 31 analysts offering recommendations for CVX, 20 rate the stock a Buy, and 11 rate it a Hold. There are no Sell ratings for the stock. A median price target of $129.50 gives the stock a 14% upside from the last price.
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