Oil giant Chevron’s recent discount relative to its peers has caught the attention of industry experts, with Citi analyst Alastair Syme upgrading the company’s shares to buy from neutral. Syme has also raised his price target to $185 from $145, indicating a potential upside of 15.4% from Monday’s closing price.
Chevron, which is up only 7.5% year-to-date, has been lagging behind the S&P 500’s 25% advance in the same period. Additionally, its rival Exxon Mobil has outperformed Chevron, with a 20% increase in 2024. Syme predicts that the valuation gap between Chevron and Exxon Mobil could widen to 20% by 2026, marking a historically significant difference between the two companies.
One of the key factors influencing Chevron’s stock weakness is its ongoing dispute with Exxon Mobil over the ownership of Hess’ oil assets in Guyana. If the arbitration panel rules in favor of Exxon, Chevron’s merger deal with Hess, which was announced earlier this year, may not go through.
Syme believes that this valuation gap provides an opportunity for investors to assess the potential outcomes of the Hess arbitration in 2025, with limited downside risk but significant upside potential. He also highlighted Chevron’s exploration opportunities in Namibia and the Tengiz Field in Kazakhstan, which are expected to contribute to the company’s growth and de-risk its investment profile.
Chevron’s stock rose 1% on Tuesday following Syme’s upgrade. The potential implications of this development on the industry and consumers remain to be seen, but experts suggest that Chevron’s strategic moves and exploration activities could shape its future performance.
Overall, the market dynamics and competitive landscape within the oil and gas industry are driving Chevron to make strategic decisions and investments to remain competitive. The outcome of the arbitration with Exxon Mobil and Chevron’s exploration efforts will likely have a significant impact on the company’s future trajectory and stock performance. Investors and industry observers are closely watching these developments for potential opportunities and risks in the sector.
