Mizuho Securities named Chevron (CVX) among its top oil & gas picks for 2024 while downgrading rival Exxon (XOM) to 'neutral' from 'buy.'
In a note to clients, analysts led by Nitin Kumar wrote "a weakening macro outlook will impact [Exxon's] Downstream operations more than IOC peers and could be a headwind."
Yahoo Finance Reporter Ines Ferré joins the Live show to discuss Mizuho's 2024 outlook.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino.
Video Transcript
SEANA SMITH: Well, we are watching shares of two oil giants here this morning, after a call out from Mizuho. Now the firm naming Chevron a top oil pick. They also downgraded Exxon and Occidental Petroleum. Yahoo Finance's Ines Ferre is at the big board here with the latest on that. Ines--
INES FERRE: Yeah, Seana, and Mizuho analysts have downgraded eight stocks altogether, upgraded three. Their thesis is that macro headwinds are likely to leave oil and natural gas prices trading in relatively tight ranges, or sideways. And looking into 2024, analyst Nitin Kumar is saying investors should focus on stocks that can create their own catalysts, either through their asset base, or through extraordinarily low balance sheet leverage.
Among the stocks mentioned, you just mentioned that Chevron kept as a buy, ExxonMobil, and Occidental Petroleum downgraded to neutral. Now these are some important stocks, because we talked about these last year, as all three companies have actually recently
announced acquisitions. As far as ExxonMobil, downgrading it to a neutral with a price target of $117, down from 133, but that's still an upside of 16% from its current value right now. And then as far as Occidental Petroleum is concerned, that price target was lower to 63 from 72, with, again, a neutral rating.
Now the analyst is citing valuations here, risks to cash returns that are making these stocks a little bit less defensive. What's been interesting, though, is through this note, is talking about this thesis about where oil prices are heading into 2024, and some nebulous scenario there, because you have the OPEC plus cuts that have been announced, but you also have more production from the US.
So this analyst, along with other analysts that I've also spoken with, seeing that oil prices are going to be kind of trading sideways, going into this year, and we'll see how this pans out throughout the rest of the year. But even JP Morgan's note last year in December, saying that you're going to see a little bit more of the same when it comes to oil prices. And much of the reason why this analyst at Mizuho downgrading a couple of these stocks and upgrading our top pick for one of them. Guys--
- Yeah, Ines, and it seems like everybody can make peace with, oil let's call it 65 to 85. You go on either side of that band, then you seem to have a couple of problems with your model there. All right Yahoo Finance's Ines Ferre.
