What happened
Now this is how to start a week off right if you're a stock.
On Monday, shares of Vermilion Energy (VET -1.42%) were a hot item on the market, rising to a nearly 12% gain across the trading day. That was in sharp contrast to the slumping stock exchange bellwether, the S&P 500 index. An analyst's recommendation upgrade on the Canadian energy company's stock was the big reason for the pop.
So what
In the estimation of Scotiabank's (BNS -1.04%) Jason Bouvier, Vermilion is now a sector outperform (i.e., buy), up from the former recommendation of sector perform (hold). Bouvier's price target on the stock is 36 Canadian dollars ($28).
The analyst's adjustment is due to recent developments in European gas prices, which have soared in recent weeks largely because of the war in Ukraine. Bouvier feels that Vermilion's share price has largely moved in concert with peer oil and gas companies on the back of a general decline in oil prices. The West Texas Intermediate crude price, for example, is presently just under $110 per barrel -- down from a peak of over $122 earlier this month.
However, Bouvier points out that roughly 40% to 45% of Vermilion's cash flow comes from European gas.
Now what
The demand for European gas should rise, if anything, the longer the war drags on and affects supply to the rest of the continent. Vermilion is a bit of a sleeper play on this dynamic, then, so investors were wise to pounce on the shares after the publication of Bouvier's new note.
