CHEVRON CORPORATION SHARES COULD BE SETTING UP FOR A BOUNCE

Chevron Corporation

have gotten crushed over the last several sessions as OPEC's lack of action took crude oil and the entire energy complex down hard. When will the drop in crude and the energy stocks' prices stop? Will the next up move be a bounce or the beginning of something more serious to the upside? Let's take a look… What the bulls see in Chevron… • Some reasonable valuation metrics: o Enterprise value of $229 billion versus a market capitalization of $205 billion o A price-to-book ratio of 1.39 o A price-to-sales ratio of 1.07 • 10.15% net profit margins • A strong debt-to-equity ratio of only 16.34% • A strong current ratio of 1.27 • A Treasury-crushing 3.7% dividend yield and a payout ratio of 38% that allows for dividend growth What the bears see in Chevron… • A P/E of 11 that seems expensive when compared to estimated 2015 growth estimates for revenue and EPS of -8.9% and -7% respectively. • A company strongly levered to the price of crude oil – which is still showing technical weakness overall Technical take on CVX… Technicians note that as bad as things seem for CVX and the rest of the energy complex today, a short-term bounce could be in the offing. It appears to the technical crowd that CVX may have to bounce in advance of the final wash out occurring the next time the stock heads lower. A bounce in CVX should simply retrace some of the recent losses – potentially taking the stock up to one of the Fibonacci retracement lines at $110.90, $112.43, $113.67 or $114.91. The next down move may take CVX to the October lows at $106.65 or even lower. Overall… Those looking to buy CVX and start the dividend clock ticking can feel confident about entering at current levels or at the end of the next sell-off. The risks are well-known, but a stabilization in crude prices will allow this company and other in the energy space to find their footing at some point. With CVX, that point seems to be close enough to take a chance.