Should you buy Chevron shares after a JPMorgan downgrade?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Sep 15, 2021
  • Chevron shares on Wednesday edged higher by 1.5% despite receiving a downgrade from JPMorgan.
  • JPM analyst Phil Gresh downgraded CVX shares from overweight to equal-weight.
  • The analyst believes CVX has not been able to offset transition costs as it shifts towards green energy.

On Wednesday, Chevron Corp (NYSE:CVX) shares edged 1.5% higher despite receiving a rating downgrade from JPMorgan analyst Phil Gresh. 

The analyst downgraded the stock from overweight to equal-weight, citing rising transition costs that the company has been unable to offset. Chevron is transitioning towards renewable energy sources amid changing market trends.

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In a note to investors, the analyst wrote:

Chevron’s higher transition spending plan does not appear to have offsets elsewhere in the portfolio.

Gresh also pointed out the importance of balancing the shift to clean energy with meeting shareholder interest. He also lowers the CVX stock price target from $128 per share to $111.

CVX shares still look substantially undervalued

Although Gresh downgraded the Chevron stock from buy to neutral, his current price target of $111.00 per share is still significantly higher based on the CVX price of $97.86, as of this writing.

Moreover, Chevron shares still trade at an attractive forward P/E ratio of about 12.42 making the stock a compelling option for value investors. However, with analysts expecting CVX earnings per share to decline by a whopping 298% this year, growth investors could opt for alternatives in the market.

Therefore, the Chevron stock looks like an exciting short-term buy, ahead of a potentially disappointing end to the year. The stock could also gain the attention of dividend investors given its current dividend yield of about 5.47%.

Source – TradingView

Chevron’s short-term rebound seems poised to continue

Technically, Chevron shares seem to be trading within a descending channel formation in the intraday chart. However, the stock price recently bounced off the trendline support to surge towards $98.00 per share.

Moreover, CVX is yet to retest the trendline resistance, leaving room for more upward movement. In addition, the stock trades several levels below the 100-day moving average.

Therefore, traders can target extended short-term gains at approximately $100.90 or higher at $104.06. On the other hand, if the stock price pulls back, it could find support at $94.99 or lower at $91.83.

Bottom line: there is still time to buy CVX shares

In summary, Chevron shares seem to have recently bounced off a key support zone after a sharp pullback. Moreover, the current trend seems poised to continue before hitting key resistance levels.

Therefore, with the stock trading at a reasonable forward P/E ratio and yet to hit current analyst price targets, CVX shares could extend the current gains, creating short-term buying opportunities for investors.

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