RBC Downgrades ConocoPhillips After Stock's Big 2018 Run
With ConocoPhillips (NYSE: COP) stock up more than 40 percent in 2018, one sell-side analyst said Thursday that the company may be a victim of its own success.
The Analyst
RBC Capital Markets analyst Scott Hanold downgraded ConocoPhillips from Outperform to Sector Perform and raised the price target for the stock from $85 to $90.
The Thesis
ConocoPhillips’ E&P approach to generate free cash flow, capital returns and improved financial performance have worked to perfection, Hanold said in the downgrade note. (See the analyst's track record here.)
With the stock up 40 percent in 2018 and competitors clamoring to emulate ConocoPhillips’ strategy, Hanold said it's unlikely the stock will continue to outperform peers in the near-term.
“Absolute valuation does not appear stretched, but we prefer the attractiveness of peers on a relative basis at current valuations,” the analyst said.
For longer-term investors, Hanold said he is still a fan of ConocoPhillips as a core holding, especially considering RBC’s new long-term oil price forecast of $88/bbl for Brent and $83/bbl for WTI by 2020.
ConocoPhillips has 15 billion Bboe in resources at an average cost of supply of only $35/bbl, leaving plenty of opportunity for long-term cash flow if oil prices remain stable and continue to drift higher, Hanold said.
Alaska, Montney and the Permian are potential long-term growth drivers and bullish catalysts for the stock, according to RBC.
Price Action
ConocoPhillips shares were down 0.23 percent at $75.36 at the close Thursday.
Related Links:
What The Oil Market Can Tell Us About Some Of The Top Energy Stocks
Energy Sector Outlook: Economic Growth, OPEC And Geopolitical Tensions
Latest Ratings for COP
Sep 2018 | RBC Capital | Downgrades | Outperform | Sector Perform |
Sep 2018 | Bank of America | Downgrades | Buy | Neutral |
Aug 2018 | Morgan Stanley | Maintains | Overweight | Overweight |
View More Analyst Ratings for COP
View the Latest Analyst Ratings
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