Chevron stock (NYSE: CVX)
Increased oil prices should imply more cash to Chevron stockholders, which would make the stock an intelligent investment, according to BMO Capital Markets.
“We expect Chevron to achieve [cash flow from operations] of $27.1Bn and $33.5Bn in 2021 and 2022, respectively, corresponding to [free cash flow] of $17.9Bn and $22.6Bn. Chevron shares have lagged other upstream producers over the last six months, despite having similar cash flow leverage to higher oil prices, according to the note.
According to Jungwirth, the extra cash will most likely be distributed to shareholders.
“We believe Chevron is in a strong position to increase shareholder returns and assume 5% dividend growth and a resumption of $2.4Bn in share buybacks beginning 2022+,” according to the note. Due to the pandemic, the company halted buybacks in March 2020.
The stock is up 23% year to date, outpacing the broader market but trailing the oil and gas industry.
Chevron has a price target of $123 per share set by BMO. That is 18% higher than where the stock closed on Friday.
On Monday, Jungwirth began coverage of Exxon Mobil, rating the stock as market perform.
Apple stock (NASDAQ: AAPL)
Piper Sandler has revised his top ideas for 3/4 stock choices to include Apple as one of the companies he thinks to have solid foundations and an appealing pricing point.
The firm screens 900 equities in its coverage universe, looking for stocks with buy ratings, a market capitalization of more than $750 million, and at least 10% upside based on its 12-month price target.
The Alpha Alignment Index, a list of stock picks, was launched in January and has since generated a total return of 42 percent, outperforming the S&P 500 by about 4 percent. It is made up of 20 companies, is equal weighted, and is rebalanced quarterly.
Here are some of Piper Sandler’s top third-quarter picks.
Piper Sandler cited Apple’s “small but interesting” product updates, such as making FaceTime more user and corporate friendly, as examples of how the company raises the performance bar and reinforces “brand stickiness.”
While there may be a short-term pause in hardware markets, analysts believe the pandemic-induced work-from-home dynamics are here to stay and that Apple will benefit as consumers require additional computers and related accessories. Furthermore, analysts believe that the tech giant’s diversification into software and services will increase its margins.
Piper Sandler has a price target of $160 per share on Apple, which closed Friday at $145.11.
Analysts believe Zoom is well positioned for a new hybrid world, with opportunities for cross-selling and international expansion. It set a $464 price target on the stock, which closed at $385.08 on Friday.
Diamondback Energy is one of its top energy picks, with a price target of $102 versus its Friday closing price of $89.42.
According to analysts, “Diamondback has demonstrated their ability to weather industry headwinds.” “The company has been one of the industry’s lowest cost operators, allowing them to generate meaningful cash flows under a wide range of crude pricing scenarios.”
Piper Sandler also mentioned Lululemon, noting that its growth is accelerating in comparison to pre-pandemic levels. Analysts say that despite the return of in-store shopping, online sales are still strong. According to them, the activewear company is attracting new types of customers and expanding its physical footprint.
Piper Sandler’s favorite health-care stocks are Dexcom and LivaNova.