We recently published a list of 12 Most Promising Energy Stocks According to Analysts. In this article, we are going to take a look at where Devon Energy Corporation (NYSE:DVN) stands against other most promising energy stocks according to analysts.
With the world pivoting towards cleaner energy sources and facing political uncertainties, 2025 can be a critical year for the broader energy sector. As per GlobalData’s Power Predictions 2025 report, numerous themes are expected to shape the global power landscape in 2025. These include geopolitical shifts influencing supply chains, developments in EVs, energy storage, hydrogen, and nuclear power. As per the Short-Term Energy Outlook released by the US Energy Information Administration, the generation in the US electric power sector is expected to increase by 2% in 2025 and by 1% in 2026, after rising 3% last year, driven by growth in renewable energy sources.
What Lies Ahead for the US Energy Sector?
As per AXA Investment Managers, the combination of increased demand and supply constraints resulted in a favourable backdrop for the broader US renewable energy sector. Furthermore, the lower cost and environmental benefits of renewable energy are some positive factors. Trump’s return to the White House kicked off with several executive orders. Apart from announcing a national energy emergency, he ordered the withdrawal from the Paris Agreement on climate change and rolled back the clean energy initiatives.
Despite such announcements, AXA Investment Managers expects the US clean energy sector to have potential investment opportunities, considering the increasing power demand. The US power demand growth remained weak between 2000 and 2020, averaging 1%. However, it is projected to increase from 2024 onwards. As per the investment management firm, a 2% – 3% increase in the growth rate per annum will be significant, reflecting a doubling or tripling of the historical rate. The overall US power demand can grow at a CAGR of 3.1% between 2020 and 2040, against 0.1% between 2010 and 2020. This higher demand will be supportive of the long-term trend, with potential investment opportunities, from power companies to the ones involved in the energy and equipment supply chain.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Trump’s Deregulation To Be a Critical Growth Factor
One of the President’s priorities revolves around reducing government bureaucracy and inefficiency. Notably, permitting new energy projects remained slow over the past few years because of understaffed government departments and burdensome environmental criteria, opines AXA Investment Managers. In an executive order on “unleashing American energy”, Donald Trump is focusing on reducing official rules and processes that seem unnecessary, and accelerating energy projects, constraining the remit of the NEPA (National Environmental Policy Act). Interestingly, most of the permit requirements stem from this act.
Overall, economics, growth and a continued climate of innovation and competition hint at the robust US power demand, which can also support the prospects of clean energy and its supply chains.
Our Methodology
To list the 12 Most Promising Energy Stocks According to Analysts, we used a screener to find companies catering to the energy sector. Next, we chose the ones that analysts see the most upside to. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 12. We also mentioned the hedge fund sentiment around each stock, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A group of technicians in hazmat suits inspecting a natural gas storage tank.
Devon Energy Corporation (NYSE:DVN)
Average Upside Potential: 39.8%
Number of Hedge Fund Holders: 41
Devon Energy Corporation (NYSE:DVN) is an independent energy company, which is engaged in the exploration, development, and production of oil, natural gas, and natural gas liquids. The company’s core multi-basin portfolio is considered one of the most robust among exploration and production (E&P) companies. Notably, this diversified asset base offers operational flexibility and supports mitigating risks related to regional fluctuations in production or market conditions.
By operating in multiple basins, Devon Energy Corporation (NYSE:DVN) can allocate capital to the most compelling opportunities throughout its portfolio, supporting returns and maintaining a balanced production profile. Its presence in key areas including the Delaware basin, Eagle Ford, and Bakken offers access to several resource types and operational environments, allowing Devon Energy Corporation (NYSE:DVN) to leverage its best practices throughout regions and potentially unlock synergies. Also, the acquisition of Grayson Mill Energy adds a high-margin production mix, enhancing its position as one of the leading oil producers in the US.
As a result of the Grayson Mill acquisition and robust YTD (period ended September 30, 2024) performance, Devon Energy Corporation (NYSE:DVN) has revised its production forecast higher in Q4 2024 to a range of 811,000 – 830,000 Boe per day, reflecting a 13% rise as compared to Q3 2024. This volume growth is expected to stem from an estimated 110,000 Boe per day of incremental production from Devon Energy (NYSE:DVN)’s Williston Basin acquisition.
Overall, DVN ranks 1st on our list of most promising energy stocks according to analysts. While we acknowledge the potential of DVN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than DVN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
