UPDATE: JPMorgan Downgrades Devon Energy (DVN) to Neutral

(Updated - September 15, 2022 6:37 AM EDT)

JPMorgan analyst Arun Jayaram downgraded Devon Energy (NYSE: DVN) from Overweight to Neutral with a price target of $83.00.

The analyst comments "Our downgrade of DVN shares is essentially a valuation call as the company has been making all of the right moves in terms of capital allocation and execution in the field. In the Shale 3.0 era, DVN’s multiple has re-rated the most among large caps, reflecting its strong execution and shareholder-friendly return strategy through its “fixed + variable” policy and buybacks. As illustrated in Figure 7, the stock is now trading at a premium valuation to the peer group. In addition, the company has announced two accretive A&D transactions in the Bakken and Eagle Ford, which will coincide with higher levels of cash return to equity holders and an acceleration in the timing of buybacks. While the latest transactions make strategic sense, we do think the second relatively noteworthy bolt-on transaction could start to impact the company’s multiple as the deals are heavier on PDP value vs. inventory depth. Finally, DVN recently announced a strategic pre-FID investment in a Floating LNG project with Delfin. We understand that the potential capex dollars net to DVN are manageable assuming the project moves to FID, but we wonder if these types of investments are more suitable for the Majors or Midstream focused companies."

For an analyst ratings summary and ratings history on Devon Energy click here. For more ratings news on Devon Energy click here.

Shares of Devon Energy closed at $72.17 yesterday.

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