Chevron Corporation Named Top Pick by Bank of America

Chevron Corporation has been recognized as a top investment choice by Bank of America analysts as they approach a "pivotal 2025."

The firm reaffirmed its Buy rating on Chevron stock and increased its price target from $168 to $180. This adjustment is based on stronger projections for free cash flow (FCF) driven by achieved project milestones, cost reductions, and strategic clarity.

Bank of America noted that Chevron's projects in the Gulf of Mexico (GoM), Tengizchevroil (TCO), and Chevron Phillips Chemical (CP Chem) are anticipated to contribute $5.5 billion in FCF over the next 2-3 years.

Despite uncertainties regarding Chevron's ongoing arbitration with Hess, which is expected to conclude in the second quarter of 2025, these contributions remain largely "underappreciated by investors."

BofA analysts stated, "If they win Hess next year, the stock could experience a substantial increase once this uncertainty is resolved. Conversely, if they lose, while the stock may dip slightly, any decline would likely be limited pending further resolution."

Moreover, should Chevron lose the Hess arbitration, its strong asset portfolio should mitigate long-term ramifications. The firm's optimistic view on the stock is further buoyed by the progress in its TCO project, projected for a first-half 2025 launch, and additional cost reductions of $2-3 billion.

The rapid stabilization of Permian production is also expected to bolster FCF. Analysts view 2025 as a crucial year with several catalysts on the horizon, such as further advancements in refining, biofuels, and operations in Venezuela.

Bank of America emphasized that Chevron's effective cost management and significant project developments position it favorably in a competitive energy sector, making it a compelling investment prospects as the new year approaches.