Chevron Corp. (NYSE:CVX)'s shares experienced a significant drop of about 15% following a quarterly earnings miss and the announcement of its proposed merger with Hess Corp (NYSE:HES)., on Monday. Despite the downturn, analyst Doug Leggate from BofA Securities views this as an overreaction and has upgraded Chevron's stock to 'buy', anticipating a potential upside of 38% from the current prices.
Leggate has also raised his price target for Chevron to $200. He believes that if the merger with Hess Corp. is successfully completed, it could spark a positive shift in Chevron's growth rate, dividend capacity, and portfolio depth, effectively resetting its value.
The company's shares have seen a 20% loss this year, contrasting with an 8% gain by the S&P 500 and a roughly 2% loss by the Dow Jones. Despite these market conditions, Leggate considers this downturn as a strategic opportunity to upgrade the stock from neutral, capitalizing on the current market conditions.
InvestingPro Insights
In light of the recent events, the InvestingPro data and tips provide an insightful perspective on the performance and potential of both Chevron Corp. and Hess Corp.
From the InvestingPro data, Chevron Corp. has a market capitalization of $274.4B USD and a P/E ratio of 10.77 as of Q3 2023. The company has experienced a revenue of $202.73B USD but with a decrease in revenue growth of -10.67%. Despite the downturn, Chevron Corp.'s dividend yield stands at 4.18%, reflecting its strong commitment to returning capital to shareholders.
On the other hand, Hess Corp. has a market capitalization of $44.24B USD and a higher P/E ratio of 30.15. The company's revenue stands at $10.22B USD with a decline in revenue growth of -2.21% as of Q3 2023. However, Hess Corp.'s dividend yield is at 1.22%, showing its consistent dividend payments over the years.
The InvestingPro Tips highlight that Chevron Corp. has raised its dividend for 36 consecutive years and 10 analysts have revised their earnings upwards for the upcoming period. This aligns with Leggate's optimistic view of Chevron's growth rate and dividend capacity. For Hess Corp., 7 analysts have revised their earnings upwards for the upcoming period, indicating a positive outlook for the company.
For a more comprehensive analysis and additional tips, check out the InvestingPro platform which includes 12 more tips for Chevron Corp. and 11 more tips for Hess Corp. You can access this valuable information by subscribing to InvestingPro.
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