COP Stock Forecast: Aspire to be the Sustained Industry Leader
This COP Stock Forecast article was written by Yuxiao Yang – Financial Analyst at I Know First.
Summary:
- The trend with carbon neutrality pushes E&P companies to reduce emissions and accelerate the transition to clean energy sources.
- ConocoPhillips fellow up with the carbon neutrality trend to set the goal that becoming a net-zero company by 2050.
- We can expect that the EPS of COP will continue to rise after the completion of the purchase of the assets of Royal Dutch Shell.
Overview of ConocoPhillips
ConocoPhillips is the world’s largest independent exploration and production (E&P) company. It was founded in 1917 by Frank and L.E. Phillips as Phillips Petroleum Company. In August 2002, Conoco and Phillips formally merge, creating Conocophillips, the sixth-largest publicly traded oil company in the world, based in Houston.
ConocoPhillips currently has 10,300 employees in 15 countries, efficiently explores and produces crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids.
Transformation and Upgrading
The global trend with carbon neutrality pushes E&P companies to find a way to produce more energy at lower costs to reduce emissions as well as accelerate the transition to clean energy sources. ConocoPhillips became the first U.S.-based oil and gas company to adopt a Paris-aligned climate risk strategy in October 2020. ConocoPhillips set the goal that reducing the intensity of greenhouse gas emissions by 35 – 45% by 2030 and becoming a net-zero company by 2050.
On September 21, ConocoPhillips purchased the assets of Royal Dutch Shell (RDSA. L) in West Texas for $9.5 billion USD. The net asset area takes 225000 acres and the current daily output is about 175000 barrels. The sale will be completed in the fourth quarter of this year. This is the company’s second big acquisition in a year. ConocoPhillips try to pay more attention to the shale field. This strategy meets the current trend with carbon neutrality to look for cheap oil and extract oil with fewer carbon emissions.
COP stock price performance currently beating the price performance for Oil&Gas Integrated Operations Industry as well as S&P500 price, according to the below chart, we can see that COP stock has a performance of 89.35% on Oct 21, 2021, higher than the industry level as well as S&P 500.
COP’s Major Financial Metrics: Compare with Industry
Recovery in demand and current high commodity prices have a positive impact on revenue. COP’s current year-to-year growth rate of revenue is 154.26, that higher by 28.94% than the competitor’s level.
(Figure 1- Revenue Growth)
COP’s current net margin is 20.48%. Current Oil&Gas Integrated Operations Industry Net margin is 9.28%, Energy Sector Net Margin is 5.73%. We can see that COP is at a relatively higher level compared with other competitors. It’s reasonable to believe ConocoPhillips is more efficient at converting sales into actual profit at the current stage.
(Figure 2 – Net Margin)
COP’s current operating margin is 49.44%. Current Oil&Gas Integrated Operations Industry Net margin is 16.31%, Energy Sector Net Margin is 13.82%. We can see that COP is at a relatively higher level compared with other competitors. We can expect that ConocoPhillips generate enough profits from its core operations and have the ability to make enough money from their operations to support the business at the current stage.
(Figure 3 – Operating Margin)
According to GuruFocus, COP’s current ROE is 5.15 and it is better than 61 % of companies in the Oil & Gas industry. This higher ROE indicates a greater value of COP, investors can expect that COP has higher profits relative to its share price. We can choose several comparable companies of COP and make a comparable valuation. COP’s current P/B ratio of 2.29 and P/S ratio of 3.18, and P/E ratio of 65.28 present that COP stocks are being undervalued.
We can see that COP has beat the previous EPS expectations 4 times in a row. COP is going to provide the Q3 2021 financial statement to the public on November 2nd, let’s expect that COP’s price will continue to increase with its strong upward momentum.
(Source: Yahoo Finance)
Conclusion
After being hit by the COVID-19 pandemic, the bottlenecks of development of Exploration and Production (E&P) companies exposed, energy transformation will be the most significant challenge. ConocoPhillips is actively following the trend of carbon neutrality, accelerating the transformation of new clean energy to pursue sustainable development. It’s reasonable to believe COP is a strong buy stock, under a stable financial situation and powerful strategy for energy transformation.
It is worth paying attention that the stock-picking AI of I Know First has a high signal on the one-year market trend forecasts, supporting my position for the COP stock forecast. The light green for the short-term forecasts is mildly bullish, while the darker green is a strong bullish signal for the one-year forecast.
Past Success with COP Stock Forecast
I Know First has been bullish on ConocoPhillips’s shares in past forecasts. On our January 17, 2017 premium article, the I Know First algorithm issued a bullish COP stock forecast. The algorithm successfully forecasted the movement of ConocoPhillips’s shares on the 1 year time horizons. COP’s shares rose by 19.74% in line with the I Know First algorithm’s forecast.
(COP’s stock price for the period of Jan 17, 2017 – Jan 12, 2018)
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Please note-for trading decisions use the most recent forecast.
