Is Chevron a buy or sell in May?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the outdoors, enjoys… read more.
on May 17, 2021
  • Chevron shares are advancing at the beginning of this trading week
  • Chevron began the second quarter in a strong position
  • The management of the company approved a $0.05 per share dividend increase

Chevron (NYSE: CVX) shares are advancing at the beginning of this trading week, and the technical picture implies that the price could advance above $115 resistance this May. The oil price is also advancing, and OPEC expects a stronger oil demand recovery in the second half of this year.

Fundamental analysis: Chevron began the second quarter in a strong position

Chevron Corporation (NYSE: CVX) is an American multinational energy corporation engaged in every aspect of oil and natural gas; 70% of its reserves are concentrated in the U.S., Australia, Kazakhstan, and the Gulf of Mexico.

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Chevron reported its first-quarter results in the last week of April; total revenue has increased by 4.6% Y/Y to $31.07 billion while the GAAP EPS was $0.72 (missed by $0.16). Total revenue has increased below the expectations (-$1.48 billion) mainly due to the Covid-19 pandemic.

The company’s management reported that capital spending fell 43% from last year during the first quarter, and for the first time since the pandemic, cash flow from operations excluding working capital exceeded cash CapEx and dividend spending.

“In summary, it was a good quarter with our strongest financial performance in a year, continued progress towards advancing a lower carbon future, and a dividend increase while maintaining an industry-leading balance sheet. As we look forward to the next few quarters and the world gets better control of this virus, I’m confident that we will continue to deliver stronger financial performance,” said Pierre Breber – Chief Financial Officer of Chevron.

Chevron began the second quarter in a strong position, but the global COVID-19 pandemic continues to pose downside risks to the recovery. Concerns over the pace of vaccination campaigns in many parts of the world still represent an issue, but despite this, OPEC expects a stronger oil demand recovery in the second half of this year.

The company’s management approved a $0.05 per share dividend increase (3.9% increase from the prior dividend of $1.29) and announced that they are thinking of beginning the repurchase of shares; still, they didn’t give a specific date.

Chevron represents an opportunity for dividend-oriented investors, the current dividend yield is around 4.9%, and with a market capitalization of $211 billion, shares of this company are not expensive. Oil price continues to perform well, and maybe now is the right moment to trade Chevron shares.

Technical analysis: Bulls remain in control of the price action

Data source: tradingview.com

Shares of this company have been moving in an uptrend last several months, and if the price jumps above $115, it would be a signal to trade Chevron NYSE: CVX shares, and we have the open way to $120. On the other side, if the price falls below $100, it would be a strong “sell” signal, and the next target could be around $90.

Summary

Chevron began the second quarter in a strong position, while shares of this company represent an opportunity for dividend-oriented investors. Chevron shares are advancing at the beginning of this trading week, and if the price jumps above $115, we have the open way to $120 resistance.

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