2024-04-04 13:41:02 ET
Summary
- Devon Energy's shares are surging due to increasing demand for U.S. shale oil and rising petroleum prices.
- The demand outlook is generally favorable and petroleum prices have soared to $85 per barrel.
- Free cash flows are still strong and FCF margins have risen to ~20% in the last two quarters.
- However, the stock is now trading at a premium to its historical valuation and the risk profile is unappealing at this price level.
Shares of Devon Energy Corporation ( DVN ) are in a big uptrend as demand for U.S. shale oil is increasing and WTI petroleum prices have risen to the $85 per barrel price level as a result. Devon Energy has seen strong free cash flows throughout FY 2023 and the price outlook, given the war in Ukraine and uncertainty relating to Red Sea shipping, is favorable. The macro setup is still beneficial, but the risk profile, given the sharp upward revaluation, has deteriorated. Because shares of Devon Energy have revalued massively higher in Q1, I am updating my rating on the independent E&P company to hold!...
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For further details see:
Devon Energy: Likely Fairly Valued (Rating Downgrade)