Goldman Sachs Upgrades Chevron (CVX) to Buy, 'After sharp underperformance'

Goldman Sachs analyst Neil Mehta upgraded Chevron (NYSE: CVX) from Neutral to Buy with a price target of $187.00.

The analyst comments "We upgrade Chevron from Neutral to Buy on (a) leading capital returns; (b) clear inflection in cash flow in 2024 and volumes in 2025; and (c) relative valuation, particularly in 2025. We have been Neutral-rated on CVX since April 2021, where we had initially lowered Chevron to Neutral following multi-year outperformance and as we saw more upside to other global majors, including then Buy-rated XOM (now Neutral). Over the past 2-3 years, we have seen CVX lag major peers and broader energy, where we believe the underperformance was predicated on (a) concerns on Upstream execution, particularly Permian/Tengiz; (b) reduced relative Refining exposure vs US Major peer XOM; and (c) positioning, following strong multi-year outperformance from 2017 to 2020. After more recent project developments (Tengiz major projects now at 98% completion), Permian volumes surprising to the upside (2Q23 volumes of 772 MBOE/d vs 1Q23 of 717 MBOE/d), and closer timeline to certain Gulf of Mexico projects coming online, we believe some of these timing/upstream execution risks have been abated. We highlight that from 2024-2026, we expect a sharp improvement in ROCE, production per share growth and FCF per share, all enabling a top decile return of capital profile in the S&P100."

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

Shares of Chevron closed at $158.87 yesterday.

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