It may not climb as high as previously thought, but there's still ample room for Devon Energy (DVN -11.67%) stock to run, according to Stifel analyst Derrick Whitfield. Whitfield now thinks that shares of the exploration and production company could rise to $65 (down from $75) over the next 12 months or so. That lowered price target represents a 34% upside from Friday's closing price.
Despite Whitfield's reduced estimate, energy investors may still want to power their portfolios with this leading upstream energy stock.
NYSE: DVN
Key Data Points
2024's forecast is underwhelming, but the stock is still a buy
According to Thefly.com, Whitfield's downgrade is a reaction to Devon Energy's fourth quarter 2023 financial results and the company's 2024 outlook. In Q4 2023, Devon Energy reported revenue of $4.15 billion, representing a 3.6% year-over-year decline. Devon Energy projects daily production of 640,000 to 660,000 barrels of oil equivalent (BOE). At the midpoint of guidance (daily production of 650,000 BOE), there would be a decline from the daily production of 658,000 BOE reported in 2023.
While Devon may face a dip in production, there are valid reasons why the company is worthy of investors' buy lists. For one, Devon is generous with its dividend, which currently provides a forward yield of 5% and is a product of the company's innovative fixed-plus-variable dividend framework. Skeptics may question the high-yield payout, but the dividend is clearly sustained by the company's ample free cash flow generation.
DVN Dividend Per Share (Annual) data by YCharts.
Additionally, the company is operating from a position of financial strength. As of the end of 2023, Devon had an investment grade balance sheet as rated by Moody's and S&P Global Ratings. Add to this the fact that the company's hanging on the discount rack -- shares are valued at 7.8 times forward earnings -- and it's clear that Devon is a compelling way for investors to power their passive income streams regardless of the lower price target.
