Despite the apparent controversy and erratic nature shadowing energy stocks, there’s a simple, undeniable relationship to grasp. A blossoming economic resurgence implies burgeoning resource consumption. A trajectory that, if sustained, would set the full range of energy sources ablaze with fresh, unprecedented demand.
Fossil Fuels Forge a Comeback
Investors eyeing the hydrocarbon spectrum discern a promising revival, precipitated by its inherent energetic potency. As green and renewable energy imperatives recede, hydrocarbons tip the scales and command renewed attention, driven by robust job markets and sustained economic growth.
Uranium Surges Amid Global Population Growth
Simultaneously, sectors like uranium experience a remarkable resurgence as they emerge from a prolonged glut. Paired with relentless global population expansion, every sector of the energy domain witnesses an unmistakable surge in demand, offering tantalizing opportunities for forward-thinking investors.
It’s against this backdrop of roaring demand that investors should turn their sights to these energy stocks, tailoring their portfolios to capture the boundless potential of these distinct market drivers.
HF Sinclair (DINO)
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The undervaluation narrative of downstream hydrocarbon expert HF Sinclair (NYSE:DINO) may appear confounding, even to seasoned market observers. At present, DINO flaunts a meager trailing-year earnings multiple of 5.08X—well under the sector median of 9.67X. Furthermore, the stock trades at a humble 0.34X trailing-year sales, positioning it beneath 77.4% of sector peers.
However, this modest valuation belies the company’s operational prowess. With a stunning three-year revenue growth rate of 21.8%, DINO eclipses nearly 72% of its industry rivals. EBITDA growth during the same period stands at 29.3%, outperforming over 66% of its peers. Despite its conspicuous relevance, HF Sinclair stands as one of the market’s most undervalued energy stocks, a status unlikely to endure.
Moreover, with more offices mandating a return to physical workspaces, the employers’ victory is virtually assured. Analysts concur, rating DINO a moderate buy—a consensus buttressed by a formidable high-side target of $76, rendering DINO an intriguing opportunity among energy stocks.
Betting on Occidental Petroleum (OXY)
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Occidental Petroleum (NYSE:OXY) is hard at work in the energy value chain’s upstream realm. Unlike HF Sinclair, OXY doesn’t offer a particularly attractive valuation—trading at 12.61X trailing-year earnings, compared to the sector median of 9.67X. Nonetheless, insiders’ robust buying activity fosters confidence among shareholders: with Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B) doubling down on OXY against prevailing sentiment.
The influx of hedge fund interest since Q4 2021 underscores the stock’s appeal, with geopolitical realities poised to catalyze Occidental’s narrative. As the security of global energy supply chains comes under scrutiny, OXY emerges as a beacon of resilience and dependability, further fortifying its investment allure.
Matching this appealing backdrop, analysts advocate a moderate buy consensus with a $68.42 price target for OXY, anchored by a sturdy $80 high-side target—rendering it an enticing contender among energy stocks.
Exploring Exxon Mobil (XOM)
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A behemoth in fuels, lubricants, and integrated operations, Exxon Mobil (NYSE:XOM) remains an undeniable force in the energy arena, vigorously navigating the tempestuous markets. While XOM sports a relatively elevated 14.89X trailing-year multiple compared to the sector median’s 9.67X, the stalwart stock contours an intriguing narrative of robustness, a narrative upheld by astute investors.
Exxon Mobil Remains a Solid Bet in a Volatile Market
A Winter Snowball Effect
As extreme winter weather conditions left electric vehicles (EVs) stranded, a reconsideration of the pivot away from traditional energy sources, such as big oil, is underway. The slow progress in achieving economies of scale with EVs, coupled with economic recovery challenges, has bolstered the prospects for big oil stocks, such as Exxon Mobil. Despite its earnings multiple being a bit worse than average, the company enjoys strong operational strengths and consistent profitability. Analysts have rated the shares as a moderate buy with a price target of $125.75, indicating a significant upside pathway for investors.
NextEra Energy Eyes A Renewable Horizon
NextEra Energy, a key player in renewable energy, plans to invest a substantial amount in U.S.-based infrastructure projects through 2025 and is ranked number one in the electric and gas utilities industry. The company is well-positioned to capitalize on the expanding U.S. renewable energy market. Despite encountering significant volatility in the past, the company is showing signs of a turnaround with analysts viewing its shares as a moderate buy, with an average price target of $69.60 over the next 12 months.
Devon Energy Seizes the Day
Devon Energy, a leading independent energy company focusing on finding and producing oil and natural gas, stands to benefit from an increase in crude oil and natural gas demand as the economy recovers. With the geopolitical tensions impacting global energy markets, the temporary underperformance of DVN stock might present an attractive buying opportunity. Analysts have rated the shares as a consensus moderate buy with a price target of $54.87, making it one of the best energy stocks to consider for bargain hunters.
Cameco Rebounds in a Changing Landscape
After a prolonged struggle following the Fukushima meltdown, the nuclear power industry, including Cameco, is finding its footing again. As the global population grows, the underlying uranium commodity has seen a resurgence. In light of this, Cameco’s stock stands to gain momentum. Analysts have painted a positive outlook for CCJ, rendering it an attractive option for investors looking to tap into the resurgence of the nuclear power sector.
Investment Opportunities in the Energy Sector
The world is on an insatiable quest for energy. Records show that energy consumption trends are only rising. That means folks on average are consuming more resources, not less.
Cameco: A Vital Role in Global Production
Cynically, this dynamic plays into Cameco’s hands. As the world’s largest publicly traded uranium company, it plays a vital role in global production. Yes, the uranium shortage crisis in Kazakhstan imposed a shockwave to the sector. But the reality is that nuclear facilities are built with uranium in mind. They can’t just switch to an alternative material like thorium on a whim.
On the other side of the argument, CCJ doesn’t make a great case for undervalued energy stocks to buy. However, meeting rising energy needs should keep Cameco relevant. Just as well, analysts remain optimistic, pegging shares a strong buy with a $54.31 price target.
NuScale Power (SMR): A Risk Worth Considering
Right off the bat, I’m personally speculating on NuScale Power (NYSE:SMR) so take what I say with a grain of salt. I also mention the caveat because SMR ranks among the riskiest energy stocks to buy. If you’ve followed its price chart, you know that it’s liable for some big swings in either direction. Like a cryptocurrency, it’s hard to predict the day to day.
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On the flipside, SMR stock has been looking very attractive since hitting (what I hope is) a bottom on Jan. 18. Fundamentally, NuScale’s business of small modular reactors is extraordinarily compelling. In a way, NuScale may help “decentralize” power through building smaller, more flexible facilities across the country. In addition, the company deploys advanced systems to protect against catastrophic failures.
One approach that it uses is called a passive safety system. Basically, it’s a system that clamps down on safety issues even if other active safety systems fail. So, you potentially get the best of both worlds – efficient nuclear power with advanced protections in place. Analysts rate shares a moderate buy with a sky-high $6.13 price target.
On the date of publication, Josh Enomoto held a LONG position in SMR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
