Raymond James upgrades Devon Energy to ‘Strong Buy’ on valuation upside
Investing.com -- Raymond James has upgraded Devon Energy Corporation (DVN) to a “Strong Buy” rating, citing significant upside potential driven by strong free cash flow generation, strategic flexibility, and opportunities to narrow its valuation gap with peers.
The brokerage raised its price target to $72 per share from $62, implying a potential upside of more than 40% from the current trading level of $51.26.
Analysts highlighted that Devon Energy is currently undervalued relative to large-cap peers, trading at approximately 4.4x 2027 EV/EBITDA compared to around 5.5x for competitors. The company is also expected to deliver a 2027 free cash flow yield of about 13%, significantly higher than the peer average of roughly 8%.
Devon plans to return capital to shareholders through more than $5 billion in share buybacks, supported by robust free cash flow. The company has also committed to returning up to 70% of annual free cash flow via dividends and repurchases.
Raymond James noted that Devon has multiple levers to unlock value, including potential asset divestitures outside its core Delaware Basin operations. Assets in the Anadarko and Appalachia basins are seen as likely candidates due to strong market interest.
Additionally, the company’s acquisition of Coterra Energy is expected to strengthen its position, potentially making it one of the largest U.S. exploration and production firms.
Devon’s operational performance has remained strong, with management expected to exceed $1 billion in merger-related synergies. Analysts also pointed to the company’s aggressive adoption of artificial intelligence to improve efficiency, positioning it ahead of many industry peers.
Production for 2026 is projected at approximately 1.36 million barrels of oil equivalent per day, broadly in line with market expectations, while capital expenditure is estimated at around $5 billion.