Wells Fargo: These 3 “Strong Buy” Stocks Have Over 70% Upside Potential
Markets are on a curler coaster currently, up someday and down the subsequent, as Wall Street’s professionals and traders alike attempt to make sense of the continually shifting information cycle. To wit: Within the first week of October, we’ve seen a fairly good September jobs report, President Trump spend three days at Walter Reed Hospital with a case of COVID-19, and on his discharge the President withdrew from negotiations with Home Democrats on a brand new COVID financial stimulus package deal. It’s sufficient to make your head spin.It’s additionally sufficient to ship the S&P up 60 factors someday and down 60 factors the subsequent day. Buyers are nervous; nobody needs to see one other financial tailspin, nobody needs to see the Administration handicapped by coronavirus, and whether or not there will likely be a stimulus package deal or not, of $1.6 trillion, or $2.2 trillion, or simply $400 billion, Wall Street would merely prefer to have some concept of what’s within the playing cards.Watching every little thing from Wells Fargo, senior international market strategist Sameer Samana summed all of it up when he wrote, “While risks remain, such as election and COVID-19-related uncertainty, we believe investors should continue to remain fully invested and we favor U.S. large- and mid-cap companies, and the Information Technology, Consumer Discretionary, Communication Services, and Healthcare sectors.”With Samana’s outlook in thoughts, we took a more in-depth have a look at three stocks backed by Wells Fargo. Operating the tickers by means of TipRanks’ database, we realized that the agency sees not less than 70% upside potential in retailer for every, and all three have earned a “Strong Buy” consensus score from the remainder of the Street.Northern Oil and Fuel (NOG)First up is Northern Oil and Fuel, a small-cap oil and gasoline exploration firm working within the Williston Basin of North Dakota and Montana. The corporate’s energetic performs embody wells within the Bakken formation, the area that helped put fracking into the nationwide consciousness. Northern’s reserves embody 7.Four billion barrels of recoverable oil, and manufacturing, at 1.5 million barrels per day, has elevated 30% over the previous three years.Regardless of the stable manufacturing development, low costs and low demand in the course of the corona disaster have put damper on 1H20 revenues. Earnings, nonetheless, are turning round. EPS was simply 5 cents in Q1, however jumped to 20 cents in Q2 and is forecast to hit 38 cents in Q3. Unsurprisingly, these positive aspects come as a number of states are loosening COVID restrictions and total shopper demand is rising.Wells Fargo analyst Thomas Hughes sees the corporate’s sound acquisition plan – and adherence to it – as the important thing.“As NOG improved its balance sheet and cost structure, the E&P sector moved in the opposite direction, particularly within its primary basin of focus (Williston). After closing a ~$300mm acquisition in 2019, NOG has selectively sought what it describes as “Ground Game” alternatives, or smaller, bite-size parcels providing near-term CF accretion on account of: (1) superior acreage productiveness evaluation and (2) a greater understanding of upcoming improvement plans. Since 2Q19, these have totaled >$90mm, and NOG is now on the hunt for extra.” Hughes wrote. The analyst concluded: “While a smaller-cap operator, we believe NOG’s limited beta to near-term oil price volatility provides strong FCF assurance, while a strong (and improving) balance sheet brings optionality to capitalize in a buyer-short market.”To this finish, Hughes provides NOG shares an Obese score (i.e. Purchase) together with a $10 price goal. This determine suggests a 90% upside potential from present ranges. (To look at Hughes’ monitor file, click on right here)Wall Street agrees with Hughes on the potential right here; the analyst consensus score of Sturdy Purchase comes from a unanimous 5 constructive opinions. Shares are priced at $5.30 and have a mean price goal of $14, giving a powerful upside potential of 166%. (See NOG stock evaluation on TipRanks)Bonanza Creek Vitality, Inc. (BCEI)Subsequent up is Bonanza Creek, one other small-cap oil and gasoline explorer within the North American power sector. This one working within the Entrance Vary of the Colorado Rockies. Bonanza Creek has energetic wells within the Wattenberg Area, utilizing fracking and horizontal drilling to extract oil and gasoline from formations first put into play within the 1970s.Through the second quarter, BCEI reported a 40% sequential decline in revenues, to $36 million, and an EPS web lack of $1.87. On the similar time, the stock has managed to retain its value; shares are buying and selling now on the similar stage they had been earlier than their ‘corona collapse’ in early March.The second quarter additionally noticed capital expenditures are available in on the low finish of steerage, and debt fall to $58 million. The corporate expects to repay that excellent stability by yr’s finish. That rosy prediction is based on assembly annual manufacturing steerage – which has been raised to the vary of 24 to 25 million barrels of oil equal per day. For the quarter, gross sales quantity averaged virtually 25Ok barrels of oil equal every day.At Wells Fargo, analyst Thomas Hughes is impressed by this firm’s stability sheet and manufacturing alternatives.“With a net cash balance expected by YE20 and PDP net of debt underpinning a valuation above where the stock trades, we view BCEI as a rare SMID value opportunity which also benefits from low leverage risk… BCEI lacks the scale required to land itself amongst the ranks of Shale 3.0 operators, but in our opinion, this might not necessarily matter given the clear value disconnect… an unlevered balance sheet provides significant dry powder to transact in a market ripe with distress-driven opportunities. Until then, non-operated development should help stabilize volumes until higher oil prices (we estimate $45-50/bbl) warrant development of the company’s Legacy acreage,” Hughes commented.Hughes’ written opinion helps his Obese (i.e. Purchase) score – and his $33 price goal suggests a strong 72% upside within the subsequent 12 months.Total, BCEI’s Sturdy Purchase analyst consensus score relies on Four opinions, breaking down to three Buys and 1 maintain. The stock is promoting for $19.16, and its common price goal of $31 implies it has room for 61% upside development forward of it. (See BCEI stock evaluation on TipRanks)Devon Vitality (DVN)Devon Vitality, the final stock on this Wells Fargo listing, is one other North American power play. This mid-cap firm operates in primarily within the New Mexico-Texas-Oklahoma space, with some further operations in Wyoming. As of the top of 2019, Devon held over 1.Eight million acres of mineral rights and 10,800 producing properly. Internet manufacturing final yr was 323 thousand barrels of oil equal per day, and reserves totaled 757 million barrel of oil equal. Roughly two-thirds of this whole is liquids, with the remainder as pure gasoline.Like the opposite firms above, Devon is scuffling with low oil and gasoline costs, falling revenues, and low earnings. In Q2, revenues fell sequentially from $2.09 billion to simply $394 million. EPS dropped into unfavorable territory with an 18-cent per share web loss.However there was excellent news, too. Devon reported better operational effectivity within the quarter, pushing whole capex all the way down to $203 million for the quarter, a financial savings of 10%. Oil manufacturing within the quarter beat the steerage by 3,000 barrels per day, reaching 153Ok barrels. However most significantly, the corporate completed Q2 with no debt maturities till 2025 and $4.7 billion in accessible liquid belongings, together with $1.7 billion in cash.Because the second quarter ended, Devon has made two essential strikes that bode properly for future efficiency. First, Devon accomplished the sale of its belongings within the Barnett Shale, netting $320 million in cash on the closing. And second, the corporate introduced it should enter a ‘merger of equals’ settlement with competitor WPX power. The merger is an all-stock deal and can create the biggest unconventional oil and gasoline producer within the US.Analyst Thomas Hughes was impressed by Devon’s merger, and what that transaction says in regards to the firm’s overarching plan. Referring to the near-term.“Management expects to generate ~$575 million of annual cash flow improvements by YE21 through initiative already underway at Devon (~$300mm) and synergies from the [WPX merger],” Hughes wrote. Trying forward, Hughes sees Devon following a cautious plan with a transparent objective in thoughts.“We believe the huge portfolio transformation Devon has undergone over the past 5+ years has been an impressive look at how a large-cap, diversified oil producer can pivot its focus. Acknowledging the challenging road Devon has traversed, “New Devon” looks to further focus operations on core parts of U.S. shale by divesting Canadian Oil Sands and Barnett assets (also Rockies CO2). We see the target of “New Devon” as achievable with the remaining U.S. Shale assets being above average, anchored by a strong position in the Delaware.” the analyst famous.According to these feedback, Hughes charges DVN as Obese (i.e. Purchase). His $18 price goal is indicative of an 106% one-year upside potential. All in all, the 17 current opinions on DVN embody 14 Buys and three Holds, supporting the Sturdy Purchase analyst consensus. The stock’s common price goal of $15.56 implies a 60% upside from the present buying and selling price of $9.75. (See DVN stock evaluation at TipRanks)To search out good concepts for stocks buying and selling at enticing valuations, go to TipRanks’ Finest Stocks to Purchase, a newly launched instrument that unites all of TipRanks’ fairness insights.Disclaimer: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is vitally essential to do your individual evaluation earlier than making any funding.