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HSBC Upgrades Chevron Stock (CVX) on Lower Middle East Exposure, Lifts Price Target
On Friday, HSBC upgraded its rating for oil and gas giant Chevron CVX +0.14% ▲ to Buy from Hold, citing several reasons, including lower Middle East exposure than rival Exxon Mobil XOM +0.95% ▲ . The bank noted that the closure of the Strait of Hormuz since February 28 has created “an unprecedented physical disruption” in oil, refining, and LNG markets.
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HSBC analyst Kim Fustier increased her CVX stock price target to $215 from $180 and raised her estimates for the global integrated oil players, citing the “macro shock” from the tensions in the Middle East.
HSBC Analyst Turns Bullish on CVX Stock
Fustier noted that Chevron stock has slightly underperformed Exxon Mobil stock year-to-date despite a much lower exposure to the broader Middle East region. The analyst highlighted that only 4% of Chevron’s upstream production comes from the Middle East, mostly from Israel (Leviathan and Tamar gas fields, which were closed as a preventive measure in early March) and some production from the Saudi-Kuwait Partitioned Zone.
Moreover, Chevron has not announced growth ambitions in the Gulf states. Fustier noted that in the downstream business, Chevron has minority stakes in Qatari and Saudi chemical plants through its 50% stake in CPChem.
Overall, Fustier prefers Chevron over Exxon due to its “unusually deep discount,” lower Middle East exposure, and higher balance-sheet gearing, which provides more leverage to rising commodity prices.
Is Chevron a Good Stock to Buy?
Overall, Wall Street has a Strong Buy consensus rating on Chevron stock based on 16 Buys and five Hold recommendations. The average CVX stock price target of $196.26 indicates downside risk of about 3% from current levels. CVX stock has risen 33% year-to-date.
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