“Chevron Stock Analysis: Why Buying Strategy Is Desirable in 2021”

[이데일리 유재희 기자] Regarding Chevron (CVX), an oil and natural gas producer, it is evaluated that a buying strategy is desirable, saying that it will be able to benefit from rising oil prices due to oil shortages.

According to CNBC, an American economic media outlet, on the 23rd (local time), HSBC analyst Kim Fusteer raised his investment opinion on Chevron from ‘hold’ to ‘buy’ and presented a target price of $189. Shares of Chevron rose 2.9% from the previous day to $156.85. According to Fusteer Kim’s analysis, it means that it can rise more than 20% in the future. On the same day, Morgan Stanley also raised its target stock price from $192 to $198. However, the investment rating was maintained at ‘Overweight’.

Founded in 1879, Chevron is an oil and natural gas producer and refiner, and is the third largest oil company in the world after Saudi Aramco and Exxon Mobil in the United States.

The proportion of sales consists of the upstream division (27%), which explores and produces crude oil, transports and stores it, and the downstream division (73%), which refines crude oil and sells it as petroleum products. Accordingly, the company is highly sensitive to international oil prices in terms of earnings and stock prices.

Amid expectations of a decrease in demand for crude oil and the possibility of a fall in international oil prices due to the global economic downturn and high interest rates, it is expected that demand for crude oil will greatly exceed supply this year, attracting attention.

The International Energy Agency (IEA) raised its oil demand forecast for this year in its recently released May report. That the world’s average oil demand will reach 102 million barrels per day. Currently, oil demand is a little less than 100 million barrels, but demand is expected to increase by 2.2 million barrels per day. This is an increase of 200,000 barrels from the 2 million barrels expected last month.

The International Energy Agency explained, “As of March, China’s oil consumption reached an all-time high of 16 million barrels per day,” reflecting “a faster-than-expected increase in China’s oil demand.” “China will account for 60% of the increase in global demand this year,” he said.

Given that oil-producing countries are cutting production, oil shortages could intensify. This will most likely lead to an increase in oil prices.

Fustier Kim emphasized, “As oil prices have fallen, Chevron shares have also fallen 7% this month,” adding, “This is a buying opportunity.” This is because oil prices are likely to rise due to a lack of oil supply.

He also paid attention to Chevron’s strong shareholder return policy. “Chevron offers a high dividend yield and maintains a strong share repurchase program,” said Fustier Kim. said. Chevron is also known for consistently raising its dividend. As of last year, the dividend yield reached 3.63% per year.

Valuation attractiveness is also an investment point. “Comparing the price-to-cash flow (P/CF) ratio with that of competitor Exxon Mobil, it has fallen to the lowest level in three years,” he explained.

Meanwhile, a total of 28 Wall Street analysts gave an investment opinion on Chevron, and 13 (46.4%) of them maintained a buy (overweight and above-market return) opinion. The average target price is $188.09, which is 20% higher than the closing price on the day.