By Peet Serfontein & Hashmeel Suka.
Chevron is a vertically integrated energy corporation specialising in the exploration, production, and refining of oil and gas products, with distribution via filling stations, airport fuel depots and industrial channels. The company sells refined products under the Chevron, Texaco and Caltex brands and markets an extensive line of lubricant and coolant products under names such as Havoline, Clarity and Meropa.
Notwithstanding a slowdown during the Covid-19 pandemic, growth over the past five years has been decent, with revenue and adjusted EPS increasing ~13% and ~30%, respectively. Oil and gas fundamentals have strengthened since 2021 following a recovery in mobility and international travel.
Technically, the stock price is trending above the key support (refer to the first chart) with sufficient demand preventing any decline beyond recent lows. This is seen as a bullish indicator, as persistent support above this key psychological level could eventually drive the price higher. A further push above the resistance level could lead to an even stronger bullish bias, with support advancing to a higher price point.
The stock is trading below its 200-day simple moving average of ~$156 and we thus take a bullish contrarian stance.
Emerging upside momentum, according to the MACD indicator as well as sidewards movement of the on-balance volume indicator, supports a bullish stance.
Share Information
| Share Code | CVX US |
|---|---|
| Industry | Energy |
| Market Capital (USD) | 279.18 billion |
| One Year Total Return | -9.05% |
| Return Year-to-Date | -0.85% |
| Current Price (USD) | 147.89 |
| 52 Week High (USD) | 174.39 |
| 52 Week Low (USD) | 139.62 |
| Financial Year End | December |
| The stock price has come under pressure over the past year, making for a decent entry point. Various technical indicators support a bullish stance. |
Consensus expectations
(Bloomberg)
| FY22 | FY23E | FY24E | FY25E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 18.83 | 13.14 | 13.05 | 14.92 |
| Growth (%) | -30.23 | -0.69 | 14.37 | |
| Dividend Per Share (USD) | 5.68 | 6.04 | 6.41 | 6.75 |
| Growth (%) | 6.41 | 6.02 | 5.34 | |
| Forward PE (times) | 11.19 | 9.84 | 9.91 | |
| Forward Dividend Yield (%) | 4.35 | 4.57 | 4.56 | |
| The market expects a drop in revenue, profit, and earnings for FY23. Growth over the medium-to-long term, however, is expected to recover steadily. | ||||
Buy/Sell Rationale
Technical Analysis:
Long-term fundamental view:
| Share Name and position | FTV - Profit Take (Close the position) |
XLP - Buy (Continue to hold) |
HSY - Buy (Continue to hold) |
|---|---|---|---|
| Entry | |||
| Current | |||
| Movement | |||
| The stock reached our profit target quite fast following a strong earnings release. |
A price retracing from the lower range of the Bollinger bands remains of interest. The ETF is trading above its 200-day moving average. Upside price momentum is supportive.
Our profit target remains at $76 with a trailing stop-loss of $72.75. Exit the trade by 9 February 2024. |
The formation of a fifth wave (per Elliot Wave analysis) remains attractive. The stock is trading below its 200-day moving average and we maintain a counter-trend strategy. Prevailing upside momentum is supportive.
Our profit target remains at $220 with a trailing stop-loss at $180. Exit the trade around 26 April 2024. |
| Share Name and position | J - Buy (Continue to hold) |
CARZ - Buy (Continue to hold) |
DAY - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 133.83 | 53.61 | 69.45 |
| Current | 136.95 | 54.37 | 69.94 |
| Movement | 2.3% | 1.4% | 0.7% |
|
Price action is holding above key support. The stock remains above its 200-day moving average. Upside momentum is supportive.
Our profit target remains at $150, with a trailing stop-loss at $130.40. Exit the trade by 23 February 2024. |
An incomplete symmetrical triangle pattern remains of interest. The ETF remains just above its 200-day moving average. Fading upside price momentum is still a concern.
Our profit target remains at $60 with a trailing stop-loss at $52.20. Exit the trade around 22 May 2024. |
Note: Ceridian (CDAY) changed its name as well as its ticker to Dayforce (DAY) on 1 February 2024.
The stock is challenging the upper limit of an emerging symmetrical triangle pattern and is attractive. Our profit target is $80, with a stop-loss of $65. Exit the position around early-May 2024. |
