In this article, we will take a look at the 12 most promising energy stocks according to analysts.
Energy stocks had an unimpressive start of 2023 as investors began to pile into growth and tech stocks amid hopes that the Federal Reserve might pause interest rate hikes. As of February 21, the S&P 500 Energy Index had declined by about 4% through 2023, underperforming the broader market benchmark by 8 percentage points. This temporary underperformance came after two consecutive years of outperformance of the energy sector when compared to broader markets. What made things difficult for energy stocks was a huge decline in prices. Natural gas prices, which were hovering around $6 per thousand cubic feet, fell to about $2.1 in late February.
This wavering performance of the energy sector comes after the remarkable returns posted in 2022. Major energy companies like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX) and Chesapeake Energy Corporation (NYSE:CHK) remained in the spotlight throughout the year. Out of the 20 companies in the S&P 500 index with the highest returns in the year, 15 belonged to the oil and gas sector. However, investors are not showing much excitement about the industry lately. The Wall Street Journal shares some interesting points to explain that. The Journal’s report said that the energy sector’s weighting within the S&P 500 stands at about 4.9%, much lower than 16.2% in the second quarter of 2008, according to S&P Dow Jones Indices. The WSJ report said:
“Some shareholders eserted U.S. shale after incurring losses in the industry’s debt-fueled oil boom in the 2010s, and fear a repeat. Others such as pension funds, endowments and faith-based organizations have sold some or all of their oil-and-gas holdings, citing concern about the industry’s greenhouse-gas emissions.”
However, the same report quoted Brad Demicco, director of private markets at Southern Methodist University’s investment office, who believes energy sector will continue to outperform the broader market for “years to come” while supplies remain tight.
Photo by David Thielen on Unsplash
Renewable Energy
Another growth horizon in the energy markets is the renewable energy sector. Governments and companies are continuing to invest a fortune in the renewable energy space as the world’s appetite for renewable, cheap energy sources grows. According to an IEA report, over a period of ten years, returns on assets for fossil fuel companies have fallen from 4% to below 2%, while the performance of renewable companies has “edged upwards.” However, the renewable energy sector has a long way to go. The report said that from 2011 to 2015, returns on assets for renewable companies were negative due to negative net incomes in many renewable equipment companies.
The IEA report also discussed in detail the average returns of investments in the renewable energy space and compares that to the returns posted by the fossil fuel energy sector. The results were surprising to say the least and point to the changing landscape of the broader energy sector.
Our Methodology
For this article we used the Finviz stock screener and scanned for energy stocks which have one year average analyst price targets at least 30% greater than the current prices. From the resultant dataset we picked 12 energy stocks that have the highest upside potential from their current levels. With each stock we have mentioned its one-year average price target (currency is $), taken from Yahoo Finance
Most Promising Energy Stocks According to Analysts
12. HighPeak Energy, Inc. (NASDAQ:HPK)
Number of Hedge Fund Holders: 4
One-Year Average Price Target: 43.38
Shares of HighPeak Energy, Inc. (NASDAQ:HPK) shares recently jumped after the company revealed that it’s exploring strategic options, including a possible sale. HighPeak Energy, Inc. (NASDAQ:HPK) said that its board of directors voted to launch a process to evaluate certain strategic alternatives including a potential sale of the company. HighPeak Energy, Inc. (NASDAQ:HPK) said that it has hired Credit Suisse and Wells Fargo as financial advisors. HighPeak Energy, Inc. (NASDAQ:HPK) plans to cut its drilling operations from six to four drilling rigs during the first half of this year. Its capital spending in the year is expected to be between $1.15 billion to $1.26 billion, and it will be further reduced to $870 million to $930 million in 2024. HighPeak Energy, Inc. (NASDAQ:HPK)’s management said in a statement that HighPeak Energy has positioned itself for “consistent strong returns.”
At the end of the fourth quarter of 2022, 4 hedge funds reported owning stakes in HighPeak Energy, Inc. (NASDAQ:HPK), according to Insider Monkey’s proprietary database. The most notable hedge fund stakeholder of HighPeak Energy, Inc. (NASDAQ:HPK) was Cliff Asness’ AQR Capital Management which owns a $427 million stake. Hedge funds also like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX) and Chesapeake Energy Corporation (NYSE:CHK).
11. Energy Fuels Inc. (NYSE:UUUU)
Number of Hedge Fund Holders: 10
One-Year Average Price Target: 10.42
Colorado-based Energy Fuels Inc. (NYSE:UUUU) is involved in the exploration of conventional and situ uranium recovery in the United States. It is one of the most promising energy stocks according to analysts.
In December, Energy Fuels Inc. (NYSE:UUUU) announced that it won a contract to sell about $18.5 million of natural uranium concentrates to the U.S. government to establish a strategic uranium reserve.
10. Earthstone Energy, Inc. (NYSE:ESTE)
Number of Hedge Fund Holders: 14
One-Year Average Price Target: 25.33
Texas-based oil and gas company has strong upside potential from its current levels, based on its analyst price targets. Last month, Earthstone Energy, Inc. (NYSE:ESTE) announced that its average daily production in the fourth quarter came in at 104,766 barrels of oil equivalent per day, which shows a growth of about 246% on a YoY basis. For full-year 2022 Earthstone Energy, Inc. (NYSE:ESTE)’s average daily production increased by 215% to about 78,167 Boepd, compared to 24,809 Boepd reported for 2021.
At the end of the last quarter of 2022, 14 hedge funds reported owning stakes in Earthstone Energy, Inc. (NYSE:ESTE). The total value of these stakes was about $149 million. The biggest stakeholder of Earthstone Energy, Inc. (NYSE:ESTE) was Shaia Hosseinzadeh’s OnyxPoint Global Management which had a $77.7 million stake in the firm.
9. Uranium Energy Corp. (NYSE:UEC)
Number of Hedge Fund Holders: 14
One-Year Average Price Target: 6.87
Texas-based Uranium Energy Corp. (NYSE:UEC) exploration company is a relatively low cost stock in our list of energy stocks with upside potential. As of March 2, Uranium Energy Corp. (NYSE:UEC) was trading at $3.64. The average analyst price target for Uranium Energy Corp. (NYSE:UEC) is $6.87.
In December 2022, Uranium Energy Corp. (NYSE:UEC) jumped about 10% after the company won a $17.85 million contract from the U.S. government.
According to the deal Uranium Energy Corp. (NYSE:UEC) will provide 300,000 pounds of U.S. origin uranium concentrates at $59.50/lb. to the Department of Energy – National Nuclear Security Administration.
As of the end of the fourth quarter of 2022, 14 hedge funds out of the 943 funds tracked by Insider Monkey had stakes in Uranium Energy Corp. (NYSE:UEC). The net worth of these stakes was about $24 million. The biggest hedge fund stakeholder of Uranium Energy Corp. (NYSE:UEC) was Richard Driehaus’ Driehaus Capital which had a $9.5 million stake in the company.
8. Vermilion Energy Inc. (NYSE:VET)
Number of Hedge Fund Holders: 17
One-Year Average Price Target: 21.25
Canadian oil and gas company Vermilion Energy Inc. (NYSE:VET) has been in the spotlight this year after the company revealed plans to return more value to shareholders. In January, Vermilion Energy Inc. (NYSE:VET) declared a quarterly dividend of CAD 0.10 per share, which was a whopping 25% increase from prior dividend. Vermilion Energy Inc. (NYSE:VET) also announced the resumption of its share buyback program. Vermilion Energy Inc. (NYSE:VET) said it expects to return up to 25% of FCF to shareholders in 2023 through base dividend and resumption of share buybacks.
As of the end of the fourth quarter of 2022, 17 hedge funds had stakes in Vermilion Energy Inc. (NYSE:VET). The net worth of these stakes was about $144 million. The most notable hedge fund stakeholder of Vermilion Energy Inc. (NYSE:VET) was Todd J. Kantor’s Encompass Capital Advisors which has a $35.2 million stake in the company.
7. Talos Energy Inc. (NYSE:TALO)
Number of Hedge Fund Holders: 18
One-Year Average Price Target: 28.25
Ranking 7th in our list of the notable energy stocks with upside potential according to Wall Street analysts is Talos Energy Inc. (NYSE:TALO). For the fourth quarter, Talos Energy Inc. (NYSE:TALO) posted an EPS of $0.20, which missed estimates by $0.33. Revenue in the period totaled $342.2 million, beating estimates by $7.94 million.
Insider Monkey’s proprietary database of 943 hedge funds shows that 18 hedge funds had stakes in Talos Energy Inc. (NYSE:TALO) at the end of the fourth quarter of 2022. The net worth of these hedge funds’ stakes was about $166 million.
6. Clean Energy Fuels Corp. (NASDAQ:CLNE)
Number of Hedge Fund Holders: 18
One-Year Average Price Target: 11.85
Clean Energy Fuels Corp. (NASDAQ:CLNE) is a notable name in the renewable energy stock universe. In February, Piper Sandler gave an Overweight rating to Clean Energy Fuels Corp. (NASDAQ:CLNE) with an $8 price target. The firm said that renewable natural gas is one of the fastest growing sectors in the renewable energy space. Piper Sandler believes this growth is driven by “supportive regulatory incentives, attractive economics, abundant growth potential, and the ability to decarbonize a wide variety of GHG-producing industries.”
Piper Sandler said Clean Energy Fuels Corp. (NASDAQ:CLNE) has strong EBITDA growth. The firm highlighted Clean Energy Fuels Corp. (NASDAQ:CLNE)’s eight projects under development, 12 additional projects in the pipeline and its partnerships with BP and TotalEnergies.
As of the end of the fourth quarter of 2022, 18 hedge funds reported having stakes in Clean Energy Fuels Corp. (NASDAQ:CLNE). The net worth of these stakes was about $46 million. In addition to clean energy stocks, hedge funds are also piling into Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX) and Chesapeake Energy Corporation (NYSE:CHK).
5. W&T Offshore, Inc. (NYSE:WTI)
Number of Hedge Fund Holders: 21
One-Year Average Price Target: 10.20
W&T Offshore, Inc. (NYSE:WTI) is a Texas-based independent oil and natural gas company. In January 2023, W&T Offshore, Inc. (NYSE:WTI) closed a $275 million private offering of 11.75% senior second lien notes due 2026.
At the end of the fourth quarter of 2022, 21 hedge funds had stakes in W&T Offshore, Inc. (NYSE:WTI). The biggest hedge fund stakeholder of W&T Offshore, Inc. (NYSE:WTI) was D. E. Shaw with a $12.6 million stake.
4. Patterson-UTI Energy, Inc. (NASDAQ:PTEN)
Number of Hedge Fund Holders: 26
One-Year Average Price Target: 21.65
Energy-related equipment and services company Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is one of the most promising energy stocks based on analyst price estimates.
Recently, investment firm UBS added Patterson-UTI Energy, Inc. (NASDAQ:PTEN) to its list of companies that are “de-risked” from earnings. UBS said that companies that are de-risked from earnings have better OCF vs earnings and have posted greater declines in their forward P/E and stronger three-month earnings revisions.
As of the end of the fourth quarter of 2022, 26 hedge funds out of the 943 funds tracked by Insider Monkey had stakes in Patterson-UTI Energy, Inc. (NASDAQ:PTEN). The total value of these stakes was $390 million. The biggest hedge fund stakeholder of Patterson-UTI Energy, Inc. (NASDAQ:PTEN) during this period was Ben Jacobs’ Anomaly Capital Management which has a $95 million stake in the firm.
3. SM Energy Company (NYSE:SM)
Number of Hedge Fund Holders: 31
One-Year Average Price Target: 45.58
Colorado-based energy company SM Energy Company (NYSE:SM) ranks 3rd in our list of the most promising energy stocks according to analysts. In February, SM Energy Company (NYSE:SM) posted strong Q4 results, according to which its adjusted EPS in the period totaled $1.29, beating estimates by $0.06. Revenue in the quarter fell 21.5% on a YoY basis but still beat analyst estimates by $56.6 million.
For full-year 2023, SM Energy Company (NYSE:SM) said it expects its production volumes to remain flat or grow by low single digits at 52.5-54.5 MMBoe.
At the end of the last quarter of 2022, 31 hedge funds tracked by Insider Monkey reported having stakes in SM Energy Company (NYSE:SM). The net worth of these stakes was $382 million. The biggest hedge fund stakeholder of SM Energy Company (NYSE:SM) was Marshall Wace LLP’s Paul Marshall and Ian Wace which had a $66 million stake in the firm.
2. Southwestern Energy Company (NYSE:SWN)
Number of Hedge Fund Holders: 44
One-Year Average Price Target: 9.94
Ranking 2nd in our list of the most promising energy stocks according to analysts is Southwestern Energy Company (NYSE:SWN). Southwestern Energy Company (NYSE:SWN) has a strong upside potential based on the average analyst price target. In February, Southwestern Energy Company (NYSE:SWN) posted Q4 results. Adjusted EPS in the period came in at $0.26, missing estimates by $0.02. Revenue in the period jumped about 14.6% on a YoY basis to reach $880 million.
At the end of the fourth quarter of 2022, 44 hedge funds had stakes in Southwestern Energy Company (NYSE:SWN). The total value of these stakes was about $824 million. The biggest hedge fund stakeholder of Southwestern Energy Company (NYSE:SWN) was DE Shaw with a $113.4 million stake.
1. Chesapeake Energy Corporation (NYSE:CHK)
Number of Hedge Fund Holders: 58
One-Year Average Price Target: 123.60
Chesapeake Energy Corporation (NYSE:CHK) ranks 1st in our list of the most promising energy stocks according to analysts. Chesapeake Energy Corporation (NYSE:CHK) recently posted its Q4 results. Adjusted EPS in the quarter totaled $4.22, beating estimates by $1.32. Adjusted EBITDAX came in at $1,032 million, while free cash flow totaled $526 million. Chesapeake Energy Corporation (NYSE:CHK) also announced that it will pay a quarterly dividend of $1.29 per common share in March.
As of the end of the fourth quarter of 2022, 58 hedge funds reported owning stakes in Chesapeake Energy Corporation (NYSE:CHK), according to Insider Monkey’s database of 943 hedge fund holdings. The biggest hedge fund stakeholder of Chesapeake Energy Corporation (NYSE:CHK) during this period was William B. Gray’s Orbis Investment Management which owns a $304 million stake in the company.
Carillon Tower Advisers made the following comment about Chesapeake Energy Corporation (NASDAQ:CHK) in its Q3 2022 investor letter:
“Chesapeake Energy Corporation (NASDAQ:CHK), a natural gas exploration and production company, emerged from bankruptcy with little fanfare in 2021, despite having rid itself of its debt burden and onerous pipeline contracts. The company was able to make two large acquisitions at very reasonable prices within its core producing areas, allowing for scale and cost savings. Then in 2022, natural gas prices began to rise well above expectations, increasing the value of Chesapeake’s large natural gas resources and production and contributing to its outperformance.”
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Disclosure: None. 12 Most Promising Energy Stocks According to Analysts is originally published on Insider Monkey.
