Why Chevron Corporation Shares Could Fly Above $140

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Chevron  (NYSE: CVX  ) gained slightly this morning after Deutsche Bank initiated coverage on the oil and gas giant with a buy rating.

So what: Along with the upgrade, analyst Ryan Todd planted a price target of $142 on the stock, representing about 14% worth of upside to yesterday's close. So while contrarian traders might be turned off by Chevron's strong rebound in recent months, Todd's call could reflect a sense on Wall Street that the company's improvement prospects still aren't fully baked into the valuation.

Now what: According to Deutsche, Chevron's risk/reward trade-off is rather attractive at this point. "In some ways, Chevron is the standard bearer for Super Major dynamics in recent years: rapid spending growth driven by huge, capex-heavy projects, shrinking free cash flow, and disappointing growth," said Todd. "However, its strength remains its steady plan and clear identity: organically driven, deep, oil-levered, high-margin project queue, now complimented by possibly the highest quality US onshore position in the industry. The turn in capex/cash flow may still be 12 months out, but the coming inflection will drive leading growth (20% by 2017) and free cash flow (~6% in 2017) in the coming years." When you couple that upbeat outlook with Chevron's juicy dividend yield of 3.5% and cheapish forward P/E of 10, it's tough to disagree with Deutsche's bullishness. 

OPEC is absolutely terrified of this game-changer
Imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour (That's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

DocumentId: 2989612, ~/Articles/ArticleHandler.aspx, 7/30/2014 5:17:35 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...