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Is This the Right Time to Buy Shares of Devon Energy?
Stock Analysis & Ideas

Is This the Right Time to Buy Shares of Devon Energy?

Story Highlights

Recently, Devon Energy’s shares have dropped 30%, coming off from its 10-year high seen as recently as just last month. Is the current dip a good buying opportunity?

Shares ofDevon Energy Corp. (DVN) gained more than 85% over the past year, touching its 10-year high of $79.40 in June. However, shares have lost 30% in the past few days, and the stock is currently trading around $50 levels.

In recent years, Devon Energy has efficiently utilized its free cash flows and generated higher returns for shareholders by transforming its asset portfolio to include high-quality oil-growth properties through synergistic acquisitions, which it continues even now.

With a current market capitalization of over $34 billion, Devon Energy Corp. is an independent oil and gas company engaged in the acquisition, development, exploration, and production of oil and natural gas properties.

Devon’s Latest Accretive Acquisition

On June 8, Devon Energy agreed to acquire the leasehold interest and related assets of RimRock Oil and Gas, LP in the Williston Basin in an all-cash deal worth $865 million.

The “bolt-on acquisition” of 38,000 net acres (88% working interest) will add 15,000 barrels of oil equivalent (Boe) per day, with an expected increase to 20,000 Boe per day over the next year.

The acquisition is highly complementary to the company’s existing position in the Williston Basin; it will boost its inventory at minimal cost; and it is immediately accretive to earnings. The deal, subject to certain regulatory approvals, is expected to close in the third quarter of 2022.

Wall Street’s Take on DVN

Yesterday, Goldman Sachs analyst Neil Mehta reiterated a Hold rating on Devon Energy with a price target of $61 (15.86% upside potential).

The rest of the Wall Street community is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 12 Buys and seven Holds. The average Devon Energy price target of $81.42 implies a 56.46% upside potential to current levels.

Positive Investor Sentiment

TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Devon Energy, with a whopping 8.4% of investors increasing their exposure to DVN stock over the past 30 days.

Key Takeaway

Devon Energy is scheduled to report second-quarter earnings on August 1, after the market closes.

Oil stocks have surely been on a roller coaster ride, touching their higher highs during the last month. However, these stocks are trending downwards due to slack in demand caused by fears of an impending recession.

The recent share price weakness presents an attractive buying opportunity to investors, especially given the company’s strong track record of returning value to investors via impressive buybacks, as well as strong and consistently growing dividends, and the financially-accretive acquisition in the Williston Basin that will further drive increased returns in the coming times.

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