The Oil Trade Isn’t Dead, Analyst Calls For 53% Return On This Play

The largest production cut since 2020 was agreed to last week by the OPEC+ coalition, which is co-chaired by Saudi Arabia and Russia.

President Joe Biden, who had been pushing for lower crude prices before the winter, expressed his disappointment.

Seen by some governments as weaponizing natural resources by the Kremlin, the move by OPEC+ threatens to push crude prices back over the $100 level by winter.

That would inevitably push the share prices of oil companies higher, and analyst Gianni Di Poce sees some big potential in Murphy Oil Corporation (NYSE:MUR).

The call: 53% potential returns for investors.

“I am bullish on [Murphy Oil] as long as the stock remains above $38.00-$39.00,” the analyst wrote in his weekly Benzinga Pro Insider Report. Adding an upside target of $67-$69.
Read also: BENZINGA TV EXCLUSIVE: Why The OPEC+ Decision To Cut Oil Production May Not Mean A Rise In Oil Prices

Murphy Oil is an independent oil and natural gas company that owns and operates the majority of its U.S. onshore assets, which are located in the Eagle Ford Shale in the U.S., and Kabob Duvernay and Tupper Montney in Canada.

The company drills for and produces oil and natural gas, which is then delivered via third-party pipelines, trucks, or railcars to facilities for processing into products such as gasoline, diesel, and jet fuel.

The company generated $2.29 billion in 2021, and while it lost $73 million in the same year, revenues came in 16.87% higher over 2020.

Valuation is fair with P/E at 13.14, Price-to-Sales at 1.93, and EV to EBITDA of 5.30.
“In other words, the stock’s still on sale,” Di Poce wrote.

The company is well positioned to keep returning a high level of capital to its investors as it has a free quarterly cash flow of $870 million while maintaining a 17.27% payout ratio.

From a technical standpoint, the stock is attempting to break out from an inverted head and shoulders pattern — if it breaks the neckline acting as resistance, it should have a good run.

The stock is generally well-liked by analysts: MKM Partners assumed a buy rating on MUR, while Truist Securities maintained their Buy rating. Piper Sandler maintained an overweight rating, and Goldman Sachs remains neutral on the stock.
Find other analyst ratings, and opinions on stocks on our ratings page. 

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