ConocoPhillips COP was upgraded Monday by UBS from Sell to Neutral with a price target reduced from $80 to $78.
Analysts led by William A. Featherston noted in a report that the shares seem to be fairly valued versus close peers after a recent pullback in the stock.
Featherston’s report suggested that since "the downstream spin, ConocoPhilips has traded within a dividend yield range of 3.3 percent to 5.3 percent, pushing up its valuation multiples vs. pure-play E&P peers despite lower relative growth."
The company’s "high yield should continue to support its valuation; assuming a 5 percent dividend increase in 2015 (to ~$3.08 per share share) and 4.5% yield implies downside support of $68 per share."
As for risks, the report highlighted concerns over "1) ongoing cash flow outspend...2) upside risk to long term capex guidance of $16.5-$17 billion in order to achieve its growth targets; 3) above average leverage to US natural gas relative" to peers.
ConocoPhillips recently traded at $74.64, down 0.21 percent.
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