Citi upgrades Chevron to ‘buy’ due to valuation gap, predicts ‘excellent growth’ By Investing.com

Investing.com — Citi got an upgrade Tuesday. chevron Corp (NYSE:) plans to “buy” from “neutral” on its valuation gap with peers, driven by upside from exploration in Namibia and the 2025 Hess arbitration resolution.

Despite a modest recovery in Chevron’s stock price over the past two months, it has significantly underperformed ExxonMobil (NYSE:) and the broader stock this year. Citi noted that Chevron’s valuation trades at a significant historical discount to Exxon and could reach 20% by 2026-2027 due to Chevron’s “outperforming growth” prospects.

Citi noted that investors are reducing their overall exposure to energy stocks, with Chevron selling due to the Guyana arbitration and uncertainty about the timing of the Hess deal. This has resulted in a discounted valuation, making it an attractive investment opportunity.

The brokerage raised its price target on the stock from $40 to $185, citing long-term growth potential and exploration. The Namibian drilling campaign could act as a catalyst with a big impact in the short term.

Chevron’s $53 billion contract Hess Corporation (NYSE:). The company, which the brokerage considers “value neutral,” is important for growth diversification but is subject to an arbitration ruling in mid-2025. Although the outcome remains uncertain, Citi argued that Chevron’s low valuation protects investors from significant downside risk.

“The ability to close the deal now hinges on the arbitration panel’s ruling mid-year, creating a binary case where confidentiality prevents investors from receiving any real assurance. However, we now argue that the valuation discount protects the downside and allows investors to enjoy significant upside in a win scenario,” Citi analysts said.