Stockchase Opinions

Phil Taller Devon Energy Corp DVN-N DON'T BUY Jul 06, 2005

Doesn't follow this one closey, but feels they have done a pretty good job. Have taken their resource exposure, including energy, down.
$53.150

Stock price when the opinion was issued

oil gas
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BUY

They just reported a strong quarter, perhaps one of the best in oil beating in earnings and oil production. Also, they raised full-year production guidance. Will rise when the Fed cuts interest rates. They pay generous dividends and buybacks.

DON'T BUY

It continues to frustrate, though earnings this quarter were very strong. The market doesn't like this name. Shares continue to do nothing.

BUY

A pipeline from the Permian to the Gulf of Mexico will come online, the Matterhorn, which will increase the flow of oil as well as natural gas, which has been trading at a negative price this year. So, the producers will be much more profitable. Two more pipelines are coming and will support the oil price and their companies. She likes Devon, paying a 5% yield and will benefit from the Matterhorn.

DON'T BUY

Is down 13% this year. She's growing short on this. Energy stocks are hit and miss--you pick your spots. The market simply doesn't like Devon.

BUY ON WEAKNESS

The CEO just left and shares are at a 52-week low. Also, the street expects oil to fall $10 a barrel. Start buying some of this.

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TOP PICK
Stockchase Research Editor: Michael O'Reilly

DVN is one of the lowest cost natural gas producers in the US.  They recently invested in a 2 bcfd pipeline to move their production from the under-piped Permian region to the Gulf Coast.  They have been prudently deploying some cash reserves to reduce debt and buy back shares.  It trades at 6x earnings, 1.4x book, and supports a 26% ROE.  Its healthy dividend is backed by a payout ratio under 40% of cash flow.  We recommend setting a stop-loss at $25, looking to achieve $40 -- upside potential of 28%.  Yield 4.7%

(Analysts’ price target is $50.12)
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This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

PAST TOP PICK
(A Top Pick Dec 26/24, Up 13%)Stockchase Research Editor: Michael O'Reilly

Our PAST TOP PICK with DVN is progressing well.  To remain disciplined, we recommend trailing up the stop (from $25) to $31 at this time.  

DON'T BUY

Is -14% and is not his favourite in energy. Prefers names like EQT.

DON'T BUY

They underperformed a lot last year, but have been righting the ship after disappointing quarters. Has deep value, trading at 4x, a 15% free cash flow yield, though worried about inventory depth in the Permian. He must prefers Canadian oil sand companies (solid balance sheet, long inventories, execution, share buybacks).

HOLD
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

DVN is cheap, and has a decent and growing dividend. The balance sheet is reasonable. Its last quarter was decent. The stock decline seems more connected to the sector and commodity prices than anything company-specific. Devon's 1Q capital spending may rise sequentially, its total daily production could still fall -- driven by the timing of drilling and completion activity -- which should hurt free cash flow. Still, synergies from the Grayson Mill deal might have helped reduce capex in 1Q. Devon's unhedged realized oil price may rise slightly, given crude benchmarks shifted modestly. The company should be relatively exposed to this, with over a quarter of its 1Q daily oil production hedged against WTI volatility. Overall, Devon’s free cash flow may have increased in 1Q. The company’s scale and manageable leverage should give it a buffer if crude benchmarks remain relatively lower in the near term due to the impact of US tariffs and subsequent trade spats. We would be OK holding today, but it will require belief in the sector and some investor patience. 
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