Amid the global economic markets facing a plethora of headwinds like supply chain constraints and rising interest rates, the record high inflation is causing the most pain to the common man, impacting his consumption.
In March, inflation reached a 40-year high of 8.5%. While it dipped a bit to 8.3% in April, it was still near its all-time high levels. This has resulted in the food prices rising the most since April 1981.
The moot cause of this back-breaking inflation has been the rise in global oil prices. On March 7, U.S. oil prices rose to their highest level since 2008 at about $130 per barrel. Although the prices have cooled down a bit, they are still above $100.
In such a scenario, investors may look at investing in oil stocks, which stand to benefit from higher margins and increasing profitability on the back of rising oil prices.
Among the top listed oil stocks that have grown an average of 35.4% so far this year, Devon Energy Corporation (NYSE: DVN) has rallied the most. Its stock has grown 52.5% year-to-date against the NYSE Composite index’s decline of 12.7%.
A Deep Dive Into Devon
Devon is an energy company focused on hydrocarbon exploration in the United States. As of December 31, 2021, the company had proved reserves of 1,625 million barrels of oil equivalent, comprising 44% petroleum, 27% natural gas liquids and 29% natural gas.
In its latest first-quarter results, the company reported impressive numbers that surpassed estimates.
Revenues for the quarter stood at $3.81 billion, up 85.9% year-over-year. Meanwhile, adjusted earnings of $1.88 were up 35% from the same quarter last year.
The company’s total production in the quarter stood at 575,000 Barrel of Oil Equivalent (BOE) per day, up 15.2% year-over-year.
TipRanks’ Data
Devon Energy has a Smart Score of 9 out of 10 on TipRanks, which means that the stock has strong potential to outperform market expectations.
Moreover, over the past month, no less than five 5-Star analysts have reiterated a Buy rating on the stock.
On May 4, Truist Financial analyst Neal Dingmann maintained a Buy rating on the stock. The analyst, however, raised the price target from $91 to $100, which implies upside potential of 43.9% from current levels.
The analyst remains optimistic about Devon’s 4,000 low-risk/high-return locations, along with about 2,500 incremental operated locations, which can provide the company with substantial operational upside. Further, the analyst expects that the company’s anticipated quarterly free cash flows of about $2 billion will allow it to continue its shareholder return program, marked by dividends and share buybacks.
Overall, the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 14 Buys and five Holds. DVN’s average price target of $77.11 implies that the stock has upside potential of 10.9% from current levels. Shares have gained 175.2% over the past year.
Meanwhile, the TipRanks’ Stock Investors tool shows that top investors on TipRanks currently have a Very Positive stance on DVN. Over the past 30 days, 17.1% of the top portfolios tracked by TipRanks increased their exposure to DVN stock.
Further, financial bloggers on TipRanks are 100% Bullish on DVN, compared to a sector average of 75%.
Conclusion
As of now, it is difficult to see any respite from global uncertainties. Moreover, the impending reopening of the Chinese economy is expected to further push the oil prices up. Amid all this, DVN stock looks attractive as it stands to benefit from the global headwinds.
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