Crude prices have cooled lately, thanks to minimal damage from Hurricane Beryl as it swept through Texas energy hubs - but brokerage firm JPMorgan (JPM) is gung-ho about energy demand going forward. Citing an expected continuation of the “revenge travel” trend, commodity analysts from the firm are forecasting that demand for crude and products will surge by 3.5 million barrels per day (mbd) and 2.4 mbd, respectively, between April and August.
Along those same lines, the International Air Transport Association (IATA), a trade group representing about 330 airlines worldwide, expects industry expenses to increase by 9% this year, due in part to higher jet fuel prices, marking another key tailwind for energy stocks. Separately, energy prices should also find support from the extension of OPEC production cuts, totaling 5.8 million barrels a day, through the next year.
For investors looking to capitalize on this positive environment for oil and gas names, here are 5 highly rated stocks that have plenty of upside potential, according to analysts' projections. Here's a closer look.
#1. Chevron
We kick off our list with a giant of the industry in Chevron (CVX). Tracing its roots back to the 1870s, Chevron is a major integrated energy company involved in all aspects of the oil and gas industry, namely, exploration & production (E&P), refining & marketing, and chemicals & petrochemicals.
Chevron's production is focused on oil (CLQ24) and natural gas liquids (NGLs), reaching over 1.5 million barrels per day in 2023. Its market cap currently stands at $281.9 billion.
Offering a dividend yield of 4.26%, CVX stock is up 2.6% on a YTD basis.
Overall, analysts have a consensus rating of “Strong Buy” for Chevron, with a mean target price of $182.81. This denotes an upside potential of 19.5% from current levels.
Recently, analysts at Mizuho Securities named CVX as one of their preferred energy picks, with a price target of $205. The brokerage rates the stock at “Outperform,” and notes that Chevron trades at a discount to its peers.
Out of 20 analysts covering the stock, 14 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 4 have a “Hold” rating.
#2. Energy Transfer
Founded in 1996, Energy Transfer (ET) is a midstream energy company engaged in the pipeline transportation, storage, and terminaling of natural gas (NGQ24), crude oil, NGLs, refined products, and liquid natural gas (LNG). Their assets are primarily located in Texas and the U.S. midcontinent region. ET also has a significant presence in gathering and processing facilities, fractionation (separating NGLs from natural gas), and fuel distribution. The company has a market cap of $54.32 billion.
Energy Transfer stock has jumped 16.8% on a YTD basis. The stock offers a dividend yield of 7.88%.
Just like Chevron, ET is on Mizuho's list of top energy picks. The brokerage likes Energy Transfer's exposure to the artificial intelligence (AI)/data center theme, and maintains a $20 price target for the stock.
Overall, analysts have a rating of “Strong Buy” for ET, with a mean target price of $18.92 - about 17.3% higher than current levels. Out of 15 analysts covering the stock, 13 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 1 has a “Hold” rating.
#3. Nextracker
Based out of San Jose, Nextracker (NXT) was incorporated in 2013 by Dan Shugar, a veteran of the solar industry. Nextracker designs, manufactures, and sells single-axis solar trackers globally. These intelligent trackers adjust the angle of solar panels throughout the day to follow the sun's path, maximizing energy output from solar farms. The company's market cap currently stands at $7.01 billion.
NXT stock, which listed as recently as February 2023, is up 26.9% over the past year, and 2.4% on a YTD basis.
NXT is also on the list among Mizuho's preferred energy picks, with the broker predicting that rising solar energy demand to power AI data centers should translate to revenue “in late 2026 or later at the earliest.” The firm has a price target of $59 for the stock.
More broadly, analysts rate the stock a “Strong Buy," with a mean target price of $60.72 indicating upside potential of about 25.7% from current levels. Out of 27 analysts covering the stock, 21 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 5 have a “Hold” rating.
#4. Permian Resources
Founded in 2007, Permian Resources (PR) is one of the largest independent oil and gas producers in the Permian, the most prolific U.S. oil and gas basin. The Texas-based company has a market cap of $12.4 billion.
PR stock is up 18.2% so far in 2024. The shares also offer a dividend yield of 2.19%.
Last week, BMO Capital upgraded Permian Resources stock to “Outperform” with a $21 price target. BMO cited the company's increased scale and attractive multiple following its Earthstone Energy acquisition, which added significant acreage to its Delaware Basin footprint.
Overall, analysts have an average rating of “Strong Buy” for PR, with a mean target price of $20.53. This suggests an upside potential of about 28.2% from current levels. Out of 17 analysts covering Permian stock, 15 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 1 has a “Hold” rating.
#5. Edison International
Incorporated in 1909, Edison International (EIX) is a public utility holding company. Its primary subsidiary, Southern California Edison, is a regulated electric utility serving millions of customers in Southern California. Edison International also has a non-regulated business arm, Edison Energy, which focuses on clean energy solutions and energy services outside of California. The company currently commands a market cap of $27.52 billion.
EIX stock is little changed on a YTD basis, and offers a dividend yield of 4.36%.
In naming EIX one of its top energy picks, Mizuho called out its "strong capital expenditure plan in the coming years and constructive regulatory environment," with “supportive regulation” in California expected to be an overall positive. The firm has an $85 price target for EIX.
Overall, analysts consider EIX stock a “Moderate Buy,” with the mean target price of $77.89 implying expected upside potential of about 8.9% from current levels. Out of 16 analysts covering the stock, 9 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 5 have a “Hold” rating, and 1 has a “Strong Sell” rating.
