Keep the faith in energy stocks but be selective, Mizuho says in Exxon upgrade
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Exxon Mobil (NYSE:XOM) and HF Sinclair (NYSE:DINO) are upgraded to Buy from Neutral on Tuesday at Mizuho, which remains positive on the outlook for U.S. oil and gas stocks in 2023 despite strong gains in 2022, with the potential for strong free cash flow the standout attraction.
But stock selection will be more important in 2023 than 2021-22, when a bullish call on commodity prices and the sector was easier to make, so Mizuho downgraded 10 stocks to Neutral from Buy to reflect a more selective view of the sector: Chevron (CVX), Comstock (CRK), EOG Resources (EOG), Hess (HES), Marathon Oil (MRO), Marathon Petroleum (MPC) and Phillips 66 (PSX).
Also, Mizuho double downgraded APA (APA) to Underperform from Buy and Delek US (DK) to Underperform from Neutral, with respective $48 and $30 price targets.
The firm's top picks are Diamondback Energy (FANG), Coterra Energy (CTRA) and Exxon, while seeing ConocoPhillips (COP), Devon Energy (DVN), Pioneer Natural Resources (PXD), Chesapeake Energy (CHK) and Valero Energy (VLO) as more advantaged Buy-rated stocks in its coverage.
As Exxon Mobil (XOM) explores for more large projects that "move the needle," management's goal to double cash flow is finally becoming apparent to shareholders, Long Player writes in an analysis published recently on Seeking Alpha.