In this article, we will take a look at the 12 most promising energy stocks according to analysts. To see more such companies, go directly to 5 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).
Click to continue reading and see 5 Most Promising Energy Stocks According to Analysts.
Suggested articles:
- 10 Hot Tech Stocks To Buy Now
- 10 Hot Healthcare Stocks To Buy Now
- 30 Most Famous Yale Students of All Time
Disclosure: None. 12 Most Promising Energy Stocks According to Analysts is originally published on Insider Monkey.
