Although the long-term growth prospects of ConocoPhillips COP are not as high as some of its peers like Exxon Mobil Corporation XOM, its accelerated free cash visibility positions the stock among "yield" names, according to BofA Securities.
The ConocoPhillips Analyst: Doug Leggate upgraded the rating for ConocoPhillips from Neutral to Buy, while raising the price target from $65 to $67.
The ConocoPhillips Thesis: The rating change follows the recent pullback in the stock, while the raised price target reflects “the improved value of its holding in Cenovus” and a strengthening balance sheet, Leggate said in the upgrade note.
“Forward Brent now stands at the highest level of the year so that on prospective free cash we agree with management that the shares look undervalued to warrant a step up in buybacks,” he stated.
“Looking forward we see COP poised to accelerate cash returns at an earlier and more significant pace than any ‘pure-play’ E&P or oil major,” the analyst wrote.
“At strip prices, we see free cash at >$30bn for the next 5yrs over a period where COP has committed to reduce debt by $5bn. After dividends, free cash suggests to us COP has capacity to buy back 25% of its current shares,” he added.
COP Price Action: Shares of ConocoPhillips had risen by 4.60% to $54.99 at the time of publication Wednesday morning.
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