HSBC thinks oil giant Chevron stands to benefit from a recovery in oil prices. The firm upgraded shares of Chevron to buy from hold, with a $189 price target, which represents about about 24% upside from Monday’s close. Chevron shares are down nearly 10% this month. HSBC analyst Kim Fustier thinks that’s mainly due to a drop in oil prices — U.S. crude is down 6% in May — noting that it opens up a buying opportunity. CVX YTD mountain Chevron stock YTD “The shares’ de-rating has opened up a valuation opportunity, notably compared to Exxon: its consensus-based [price-to-cash flow] multiple has fallen to a more than 3-year low vs its US Supermajor peer,” Fustier said. Meanwhile, the International Energy Association recently warned of a pending oil shortage that could lift prices higher last Tuesday in its monthly report for May . Fustier also expects Chevron to continue to pay high dividend yields and maintain a robust stock buyback program. “We expect Chevron to continue to over-distribute in the medium term, assuming that the company will sustain its annual USD17.5bn buyback going forward in our base case oil price scenario of USD85/b Brent,” she said. — CNBC’s Michael Bloom contributed to this report.
