Wall Street’s top picks to play energy prices, hydrogen
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From soaring commodity prices to the “multi-billion dollar” hydrogen opportunity, analysts at Morgan Stanley and Bernstein name their top stocks to navigate the booming energy sector. In a year where the overall stock market suffered a lot, the sector was one of the bright spots. Energy is one of just two sectors on the S & P 500 that are in positive territory this year, Bank of America said —up 56% year to date. Bank of America is encouraging investors to stay long in this sector. “Our commodity strategists expect that a sharp contraction in Russian oil exports could trigger a full-blown 1980s-style oil crisis … pushing Brent well past $150/barrel, up from the current [price of around]$120/barrel,” Bank of America strategists, headed by Savita Subramanian on Jun. 1. “With China reopening, peak driving season, and favorable positioning/valuations, we see more upside.” This sector has seen a rise in crude oil prices, as well as increased consumption, and disruptions to supply due to Russia’s invasion. Gasoline prices, meanwhile, have also hit record highs. Morgan Stanley pointed out that Asian energy producers have been producing more gasoline than their international counterparts. Mayank Maheshwari and his analysts at the bank said this is due to rising gas prices in India, Thailand, as well as other Asian countries. The top three most overweight picks for this sector are Australia’s Woodside Energy, Thailand’s PTT Exploration and Production and China National Offshore Oil Corporation. Woodside has a “strong balance sheet”, which the bank said gives them the flexibility to invest in growth and distribute capital. It also helps prepare the country for the energy transition. Woodside is currently trading at around 32.90 Australian Dollars ($28.80). 7 — an implied upside of 21.6%. Morgan Stanley likes PTT Exploration and Exploration because of its high quality growth. According to Morgan Stanley, the bank anticipates the company to grow its compounded volumes by 13% through 2024. It also sees potential upside for dividends growth and earnings growth. China National Offshore Oil Corporation anticipates 6.4% compound production growth through 2025. Morgan Stanley thinks it will be able reap all the benefits of high oil prices. Morgan Stanley estimates that the stock’s closing price was 12.1 Hong Kong Dollars ($1.80), which is 15.7% more than its target price. 7. Hydrogen opportunity worth multi-billions of dollars 6. We suspect that the secret pocket of potential lies in ‘picks & shovels,’ the capital goods needed for the success of the hydrogen economy. Green pointed out that capital goods were “indispensable” to the hydrogen industry due to its highly electric-intensive nature and complex processes, as well as the unique qualities of the fuel. Bernstein considers Aveva and ABB the “best-positioned” stocks for the future growth of hydrogen. Bank rated the stocks overweight. ABB, which is a Swedish manufacturer and distributor of industrial robots, said that it offers many products throughout the entire hydrogen value chain, from transportation to storage, production to consumption. Green said that ABB has a long history of expertise in electrification, automation and energy-intensive processes. The bank also stated that the company is able to control heavy electrical loads accurately and use this expertise to affect most of the hydrogen value chain. On June 6, the stock was trading at $40. 6 represents a potential upside rate of 26.6%. Bernstein likes U.K. software company Aveva, which offers a 3-D visualization platform that is used by heavy processes industries and is looking at serving so-called “grey,” “blue” or “green” hydrogen plants. A price target for the bank of 3500 pence (or 44 pence) is a 57% upside to its Jun closing price of 2,230pence. 6.
On May 25, 2022, gas prices exceeding $7.00 per gallon will be displayed at Chevron stations in Menlo Park and California.
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From soaring commodity prices to the “multi-billion dollar” hydrogen opportunity, analysts at Morgan Stanley and Bernstein name their top stocks to navigate the booming energy sector.
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