Chevron’s strong run has baked in much of its strength

Investing.com -- Chevron shares has gained around 16% year to date on Venezuela optimism and higher oil prices, rather than a change in company’s underlying outlook.

HSBC downgraded the stock from Hold from Buy as stock’s recent rally has priced in much of the company’s strengths, leaving limited upside from current levels. Share of the company were down 1.3% in Monday premarket trading.

Brokerage raised its price target to $180 from $169, implying about 2% upside.

Chevron’s fourth-quarter results beat expectations, with adjusted earnings about 6% above consensus.

Upstream earnings totaled $3.2 bln, supported by strong performance in Kazakhstan, the Permian and the Gulf of Mexico. Total production of 4.05 million barrels a day came in 2% above estimates, while $3bn in buybacks landed at the top end of guidance.

Chevron’s 2026 guidance remains unchanged from its investor day. The company expects capital spending of $18bn to $19bn and upstream production growth of 7% to 10%, despite a dip in volumes early next year due to outages in Kazakhstan and U.S. onshore assets. Chevron also reiterated its target to deliver $3bn to $4bn in structural cost savings by the end of 2026, with more than 60% expected to come from durable efficiency gains.

Venezuela remains a focus, but HSBC said the impact is likely to be modest.

Chevron said it could lift production there by about 50% within 18 to 24 months without increasing net capital spending.

HSBC noted Venezuela currently contributes only 1% to 2% of group cash flow, meaning an incremental increase of roughly 120,000 barrels a day is unlikely to materially move earnings.

While HSBC said it continues to favor Chevron’s financial discipline and cash flow profile, it argued valuations now look fair.

The bank said Chevron’s small discount to Exxon Mobil on 2026 estimated EV to DACF is justified, and flagged that Chevron’s forecast 2026 distribution yield of 7.2% trails European peers such as BP, Total and Shell.

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